Why would the government lease equipment?

Why would the government lease equipment?

Recently I was asked to quote on a large order of fitness equipment for a local college.   Not only did the procurement officer want to see payments, he also asked what the benefits of leasing would be for a government entity.This is a prudent question as one of the biggest reasons a business would lease is the tax benefit.  As you can well imagine, government run establishments don’t pay taxes and therefore wouldn’t be deducting lease payments from taxable revenue.   Private businesses would be able to write off 100% of the lease payments as opposed to depreciating the asset slowly over time.

Enter, MUSH Leasing…. Leasing for Municipalities, Universities, Schools and Hospitals.

Here are some answers we presented:

  1. Lease financing spreads the initial cost, including taxes, of new equipment over its useful life expectancy.  Rather than allocating funds from a capital budget, the equipment is paid for as it is used from an operating budget.
  2. Equipment may be added or subtracted from a lease during the term as the departments’ requirements change.
  3. Lease payments are generally made through an operating budget, leaving capital funds available for other opportunities or expenses.
  4. Interest rates are the lowest they have been in many years.
  5. End of Term Options – Leasing allows for the department to purchase the equipment at the end of term, or have it removed by the lessor.  The lessee is not responsible for the disposal of obsolete equipment.
  6. Lease rates are fixed over the term of the contract.  This facilitates accurate budgeting outside of the current year and into subsequent years.

In an era where everyone, including our governments, are trying to do more with less, the leasing option will allow this organization to get what they need now, without draining their current budget.