Finance Leasing Manual - FLM6.34

Where lessee is liable to tax

The finance lessor doesn't always benefit from timing gains when all the variables are taken into account. Even where the lessor can afford to make lower charges than a lender, leasing isn't always better than borrowing for the user of kit. Where the user is a tax payer it will be interested in a 'net present value' comparison of the cash flow effects for it of the leasing and borrowing options available. One obvious point is that a tax-paying borrower will get the cash-flow benefit of the capital allowances.