Many CFOs and other financial managers have bought into the asset finance philosophy that equipment leasing supports a prudent asset refresh strategy.
Particularly with information technology, equipment obsolescence can be a problem because of short asset life cycles, typicall no more than three years. When equipment is purchased, the cost is capitalized, and depreciation expense can linger after obsolescence. When it is leased, so the theory goes, this threat of obsolescence before the equipment is “paid for” is eliminated.
