Tax-Exempt Status Makes Leasing Appealing

Sometimes we overlook just how inexpensive municipal, tax-exempt leasing really is - especially as compared to personal or automobile loans that we are all familiar with.

By providing for tax-exempt financing, the government has made it very inexpensive for political subdivisions to borrow money - perhaps so inexpensive that it becomes hard to justify spending cash when you can use a municipal, tax-exempt lease to acquire new assets.

For instance, let's say your agency has $200,000 in cash and you need a new computer system that costs $200,000. You can either pay your $200,000 cash for the computer system or you can invest the $200,000 in a U.S. Treasury Bond and lease the computer system with a municipal, tax-exempt lease.

In the first instance, you don't have your $200,000 cash anymore but you do have your $200,000 computer System.

In the second instance, you still have your $200,000 which is earning interest, you also have your $200,000 computer system with a corrersponding municipal, tax-exempt lease arrangement.

If your agency is thinking about acquiring a new equipment, please keep in mind that tax-exempt interest rates and interest rates on investmments are about the same.

Equipment is easy to lease. Perhaps it makes sense to lease your equipment and keep your cash for a rainy day or for projects or events that are difficult to obtain financing for.