At Ocean Telecom we partner with Tower leasing to provide a range of finance packages to help with your equipment purchases. It’s important to understand the potential benefits of either purchasing equipment using your capital or leasing.
Here you’ll find an example:
lease v buy
One misconception that leasing still suffers from is that it is not cost-effective, in addition to the benefits leasing brings it competes very well in simple monetary terms. Customers need to understand that leasing can indeed prove its case on cost-effectiveness grounds.
Example:
Company A is looking to purchase new equipment for its business. The supplier has offered them two options, either to buy the equipment outright or to utilise a lease option.
Assumptions:
• Equipment Price: £7,374
• Lease Period: 3 Years
• Frequency: Monthly
• Company’s Tax Rate: 30%
Cash Purchase
Tax relief is only available on the capital allowances on the equipment.
Year Capital Allowance Tax Relief
1 25% of £7,374 = £1,843 Less 30% = £553.00
2 25% of £5,531 = £1,383 Less 30% = £415.00
3 25% of £4,148 = £1,037 Less 30% = £311.00
Total tax relief: £1,279.00
Lease Rental
Tax relief is available on all rentals, in this case at a rate of 30%.
Year Rentals Paid Tax Relief
1 12 rentals of £252.00 Less 30% = £908.00
2 12 rentals of £252.00 Less 30% = £908.00
3 12 rentals of £252.00 Less 30% = £908.00
Total tax relief: £2,724.00
Equates to:
Cash Purchase Lease Rental
Total tax relief: £1,279.00 £2,724.00
By choosing to lease, Company A would gain over £1,400 more in tax relief when compared with a cash purchase.
If you’d like further information, please call our team on 01284 729869
