Whether you are a sole trader, a PLC or a government department, cash flow is the life blood of business. When it comes to spending large chunks of it on IT equipment, sooner or later the same question will come up; is it better to buy the equipment outright or to lease it? Below we will try to show you that from a cash flow point of view leasing has considerable advantages.

An up-and-coming sales company has decided that it needs to update its ageing servers. They have decided that the network upgrade will cost a total of £11,750 inc VAT, they have also decided that they expect to expand further within in the next 3 years to ensure that they don't fall behind the technology stakes again. The following two scenarios show the financial benefits of leasing against buying.

Even though the lease rental has a higher cost of £2,348 the ability to claim all payments against profits compared to the £5,781 for the outright purchase shows the tax benefits of leasing equate to almost £2,000 - a net cost of difference of £378 but have had the benefit of £10,000 working in the company, or sitting earning interest or avoiding onerous overdraft charges.