There are many benefits to tax-exempt leasing:

Financial Benefits

  • No down payment is required.
  • Lower rates available – Interest income is exempt from federal taxes. Therefore, lower financing rates may be available, resulting in lower payments.
  • Hedge against inflation – buy now at today’s low interest rates before prices rise.
  • Builds equity.

Operating Benefits

  • It is typically not considered debt.
  • For municipalities, it is part of the operating budget – Only the current year’s payment is included in the current budget.
  • Enables replacement of obsolete or maintenance intensive equipment.
  • Can be implemented quickly since voter approval is not typically required.
  • Risk is low – For municipalities, the funds for payments are subject to annual budgetary appropriations. If funds are not appropriated, the municipality has the right to terminate the lease without penalty.
  • Lessee takes title – Typically, the Lessee takes title to the equipment at the beginning of the lease. The Lessor takes a security interest in the equipment as collateral.

Flexibility

  • Can be used for large and small projects.
  • Can be used for new, used, and refurbished equipment.
  • Flexible terms available (1-15 years, annual, semi-annual, quarterly, or monthly payments).