Equipment leasing is slowly becoming increasingly relevant for all business sizes and types. Regardless of the industry your business belongs to, the chances of your company considering equipment leasing nowadays are pretty high.
While many people still believe buying is a better investment than leasing, that’s not necessarily the case. Nevertheless, before you sign off on any leasing deal, it’s essential to know everything there is about equipment leasing. This article might be a good starting point.
About equipment leasing
Leasing is a term most commonly used in the financial world. Essentially, it allows people or companies to rent something instead of purchasing it.
Leasing agreements typically last several years, although the leasing period can be very flexible. Once the contract is up, the lessee must return the items to the lessor or sign a new agreement to renew the leasing period.
When it comes to equipment leasing, leasing contracts allow companies and businesses to lease tools required to complete their professional tasks. The equipment can be anything from cars for logistic companies, heavy machinery for industries and factories, and computers and software for IT equipment leasing.
Benefits of leasing
Many business owners are concerned about equipment leasing losing them more money than earning it. Although equipment lease contracts can come with high interest rates, sometimes these prices are nothing compared to how much you’ll have to spend on constantly selling and purchasing new equipment.
Therefore, here are some of the crucial benefits of equipment leasing:
Easier financing
Most small or medium-sized businesses can’t afford to pay for expensive equipment. While a bank loan may be one of the available options, leasing is much better accepted by the companies.
Namely, leasing allows the lessees to pay a fixed daily, weekly, monthly, or yearly amount for the equipment they’re using. Nevertheless, most agreements don’t require significant down payments, which is great for companies that don’t have plenty of capital.
Frequent equipment upgrades
Some companies and industries require frequent equipment changes because the technology is progressing at a rapid speed. In those cases, it’s not worth it for companies to invest in the equipment and purchase it. The tools quickly become outdated, which leaves business owners with a lot of obsolete equipment.
Instead, leasing the equipment and upgrading it regularly is a much smarter business move.
Eligible for a tax deduction
Most equipment leases are eligible for a tax deduction, although this can alter depending on the agreement. Therefore, you might be able to deduct your payments by treating the leases as a business expense.
Buying vs. leasing
Most business owners are contemplating between buying and leasing equipment for their company. Although both options come with their unique advantages and disadvantages, several factors can influence your final decision, including:
- Price of the equipment
- Tax rates
- Equipment usage
- Maintenance costs
With that being said, leasing is a better option if your business is in an industry that requires frequent equipment upgrades. The IT industry is one of the examples since software programs, technology, and electronics are evolving and advancing rapidly.
On the other hand, buying is a better investment in the long run if the equipment will last you a long time and won’t get obsolete. Additionally, you can resolve the issues promptly as you don’t have to wait for your lessor’s approval.
Depending on your company and the type of equipment you need, you can choose between buying and leasing to achieve optimal results.
Things to consider for leasing
Before you decide whether you want to sign a leasing agreement or not, it’s useful to answer several questions first.
- What’s your monthly budget?
Because most leases function on monthly payments, you need to calculate whether your company can cover the monthly expenses connected to equipment leasing.
- How long do you need the equipment for?
For short-term use, a lease is the best solution. Because the equipment is expensive, it’s not worth purchasing it if you only need it for a limited period. Instead, lease the equipment at a lower price and return it when you no longer need it.
- How long before the equipment becomes obsolete?
Are you working in a fast-changing industry? Then investing in tech equipment that’ll become outdated in just a few years isn’t the best solution. In this case, leasing and upgrading your equipment regularly will ensure your company maintains its efficiency.
Conclusion
All in all, equipment leasing gained importance and popularity by becoming increasingly used by companies who want to keep up with the latest technology trends. If you want your company to follow this principle, too, equipment leasing might be among the best choices that’ll ensure your business advances at all times.
