Buying VS Leasing: Which Is More Cost Effective?

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There are many factors that determine whether or not a business should lease or buy its equipment. One of the most important factors business owners should keep in mind is taxes. The tax consequences of buying a truck are different from that of leasing. When it comes to leasing, there are generally two types: operating lease and capital lease. The type of leasing the business chooses to go with will determine how it will show in their balance sheets, and therefore, show in their tax implications. Operating Lease When a business owner uses an asset on an operating lease, the business assumes no risk or benefit beyond use of the asset under the agreed terms and conditions. At the end of the lease, the business owner must return the asset to the original owner. On the balance sheet, the owner’s lease is deducted as an expense. Capital Lease A capital…

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