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The answer would vary depending on each particular situation. Loan may be preferable over leasing and vice versa. The factors affecting the decision are loan/lease term, cost of financing, bank facilities available and utilized, balance sheet health, ease of doing documentation , up-front/management fees, shariat compliane with respect to laon (if you are in GCC) etc. You may prefer a loan over lease at times and a lease over loan at another ocassion. Generally speaking lease is costlier over a loan but offers a good alternative to loans. Hope it is useful.
Hi..I will try to answer this..
Leasing an expensive piece of equipment makes it more affordable month to month, but it can cost you more in the end. Purchasing outright, however, is not always the best option either.
Every business needs equipment. From mundane office electronics to heavy machinery, funding your business's equipment needs can become costly. Cash flow concerns mean that purchasing items in full is often out of the question. Leasing the necessary equipment or taking out a purchase loan spreads the cost over a period of time. There are distinct advantages to each system, and different scenarios where one procurement technique should be favored over another.Generally speaking, leasing any given piece of equipment is more expensive than buying it outright.
Despite this cost difference, there are many good reasons to lease. If the items you are considering purchasing run the risk of becoming obsolete before the end of their usable life, leasing would be a good option. This is true for goods such as computers and other electronics that rapidly become outdated. You stand no chance of recouping the initial cost of the equipment, and you'll likely need to use it long after it's considered state-of-the-art. Signing a lease agreement means that you'll be able to trade in the equipment for newer models, and don't have the carrying costs associated with aging assets that may break down or need repair.
There are also several financial incentives to leasing. Unlike a purchase loan, a lease agreement usually requires no down payment, conserving cash. Lease payments may often be written off as a business expense on your tax return, another benefit to leasing. While these two monetary benefits can make leasing an attractive option, it is important to keep in mind the length of the lease term. If your business needs change suddenly and you need new or different equipment, you may be forced to pay hefty early termination fees to break your lease. As a general rule, if you plan to use the equipment for five years or less and there is a good chance of obsolescence, leasing is a good bet.
