By Jennifer McNett, CPA
Manager, Tax Services Group
One of the most frequent questions we encounter as business advisors is whether a client should lease or buy an expensive piece of business property. This can pertain to virtually any kind of asset, from real estate and vehicles to factory equipment and laptop PCs for the staff.
This is a seemingly easy question with a multifaceted answer, as the best course of action is specific to each organization's circumstances. Depending on your company's needs - maximizing deductions, preserving cash flow, maintaining newer equipment, etc. - leasing or buying can each lend their own advantages.
In general terms, if cash flow is an issue then leasing is generally the best option. For tax deductions, buying is usually more advantageous, especially when you use accelerated depreciation to expense the full amount up front.