Understanding The Ups and Downs Of Leasing Equipment

Leasing equipment is an alternative to purchasing equipment where you pay the legal owner of the equipment a periodic fee to use the said equipment. At its core, what you are actually doing is renting the equipment for a period of time.  Whether you purchase your equipment or lease, it depends on a variety of factors. Under certain circumstances, leasing makes a lot of sense to any business. Hardly surprising that over 70% of businesses in the United States are using leased equipment to a certain extent. In this article, we examine the pros and cons of leasing equipment.

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Benefits of Leasing Equipment

There are many benefits of leasing equipment and we are going to list just a few of these:

• Eliminates the need for equipment ownership: While this statement might sound like a paradox, there are actually situations where you are better off not owning equipment. This is because equipment ownership ties down your capital and leads to depreciation costs. This makes a lot of sense in situations where you don’t need the equipment for a long time.
• Gives you access to the latest technology: If you purchase a piece of equipment, then you are basically stuck with it until you need to replace it. During that time period, technology may change, and your competitors might get an advantage over you as they are using the latest technology. Leasing equipment allows you to get around that problem. Leasing companies may set the lease period for a year or two but it happens on a case to case basis. If nothing new is in the market, you have the option of renewing your lease agreement. If there is new technology, then you have the option of leasing new equipment.
• Greater Flexibility: When you are in business, you may sometimes purchase a piece of equipment but not be entirely sure that you will need it down the road. This is where equipment leasing offers excellent flexibility. There is no need to make huge upfront payments that may affect your cash flow in the short term.

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Disadvantages of Leasing Equipment

There are a number of disadvantages when it comes to leasing equipment. One of these is the fact that you don’t own the equipment. This means that any tax benefits that you might derive from ownership of the equipment are denied to you. The second factor to consider is that depending on the type of equipment, there might be limitations to what you can do with the equipment. The company that leases the equipment might also impose conditions on the movement of the equipment and so on.

Trying to understand if leasing equipment is the right step for you can be complicated. Analyzing your business needs and identifying an excellent equipment leasing and financing company are the key steps to getting it right.