Quarterly Q&A – Summer 2020

Q: I am thinking of selling my company and need to replace a piece of equipment (or vehicle). Should I lease?

A: Leasing is rarely your best option if you are considering selling you business. If the lease is at an under market rate, does not have any pre-payment penalties, has a reasonable buy-out provision (example $1) and can be easily transferred to a new owner, then you may have found an exception.

However , typical leases create major problems at closing since many leases are not transferable and have no or very few buy out options except for the full amount of the payments for the full term of the lease. You can lose a material portion of your equity by choosing the wrong option! When in doubt…(and if you refuse to pay an advisor to review your options), paying cash or getting a loan will typically give you the best result.