leases, loans, rent to own

[almiller]

I am a small business and have been financing equipment in several ways - financing leases, loans to finance and I am looking into structuring rent-to-own deals. My question is, which is the most advantageous to a small business.

Can you confirm the below is true

leases - property transfers at outset but I can re-possess equipment for non-payment, most often taxes are not due up front (except in jersey), the lessee claims depreciation, and the lessee can deduct interest payments

loans - property transfers at outset but I can re-possess equipment for non-payment, taxes are due up front, Can I claim depreciation or any other deductions?

rent to own - same as the lease, but property is not transferred until the conclusion of the term payments

Thank you

[nealrm]

Are you asking as the person providing the equipment to others, or as the person that is needing to rent/lease the equipment?

[almiller]

sorry - I didn't make that clear. I am selling/leasing the equipment out to my customers. I typically sell equipment outright, but some people can only purchase if I finance it in some way and I can't seem to untangle which is the best option.
thank you.

[nealrm]

Have you looked into having a third party finance the purchase. You get your money upfront, the third party gets the head aches of processing payments and repossessing if necessary.

[almiller]

we make good money on the financing, so there is no need to outsource. I am just looking for any tax, depreciation, or property transfer benefits that one type of financing might offer over the others.

[MyITGuy]

leases - [b]property transfers at outset[/b[ but I can re-possess equipment for non-payment, most often taxes are not due up front (except in jersey), the lessee claims depreciation, and the lessee can deduct interest payments

It would be my understanding that the property would not transfer in a lease, unless they make a lump sum payment at the end of the lease that would cover the current market value of that property. Otherwise this would be no different than a lease/rent to own program.

[Paul]

If you lease the equipment, you still own it, and you take the depreciation. The customer takes the lease payment as an expense. You take the lease payment as income. It is not a sale. If there is a buyout at the end, then that is a sale. You should check this but i believe your cost would be the original cost less the depreciation.

HOWEVER, if the lease is through a finance company that actually purchases the equipment from you, pays you, and then leases to the customer then, from your perspective it is a sale. The finance company would take the depreciation and the customer still takes the payments as an expense.