 |
Equipment Lease |
Equipment Loan |
Requires a significant downpayment? |
No |
Yes |
Secured with collateral? |
No. The equipment itself is collateral. |
Yes. Additional assets are often required. |
Who bears the risk of equipment obsolescence? |
The lessor |
The end-user |
Can claim tax deductions? |
The entire lease payment can be claimed under most types of leases |
The end-user may claim tax deductions for depreciation and interest. |
Recorded on the balance sheet? |
With an operating lease, the equipment does not appear as an asset. |
Equipment is recorded as an asset and liability. |
Effect on cash flow? |
Lease payments are generally spread out comfortably over time |
The initial downpayment and strict repayment schedule can put a strain on cash flow. |
