“Leasing equipment has long been a popular means of reducing business costs.” – INC

Paying Cash: The Concept!
Most people pay cash because they have it. There it is , sitting there in the bank just waiting to be spent on something productive like some new equipment. Besides, if you pay cash for that new equipment, you don’t have to mess with those pesky monthly payments. Additionally, since I own the equipment, I can depreciate it which is a great write-off that helps lower my taxes. It sure sounds like paying cash for that new equipment is an excellent way to go.

Paying Cash: The Fallacy!
Many times an example makes the point best, so let’s use an example to make a very important point here. Let’s assume your Son comes to work for you. You have agreed to hire him for $40,000 per year because in your analysis you have determined that his employment will either make you or save you an amount in excess of that. Now he comes to you and agrees to sign a binding Contract of employment where he promises to work for you for the next 5 years under well defined conditions, and as a result he wants his 5 year salary of $200,000 right now. I assume you would decline his offer (if not, please call me) because as a good businessman you are aware of two basic concepts that come into play here: (1) you are going to pay him out of the cashflow he makes or saves you; and (2) why pay in today’s Dollars what you can pay in tomorrow’s Dollars. This same concept is as basic to purchasing equipment as it is to hiring employees. You should let the equipment pay for itself out of the cashflow it generates for you over its useful life, and use inflated Dollars to do it. Following are a few other points to consider in the Cash-Fallacy: