It’s quite expensive to buy and maintain equipment. As soon as the equipment is purchased, its value starts decreasing and may become inferior or obsolete when a new version is launched. Many businesses prefer equipment leasing over buying due to the higher costs of buying and operating equipment. One of the key benefits of leasing is lower monthly payments that are spread over years or months rather than paying in lump-sum.
Commercial equipment leasing often includes service add-ons or service agreement, which provide complete peace of mind to business owners. So, if you can’t afford new equipment then leasing is your ideal solution. Make monthly payments over a specific period without worrying about the higher one-time investment. Once the term period is finished, you may have to return the leased equipment or purchase it by keeping in view the market price and the sum paid during the lease period.
Advantages of equipment leasing
- Many lessors may not ask for a down payment.
- If you are in a business that requires a continuous update of equipment, then leasing is the best option. It’s because you don’t have to experience obsolete equipment.
- If you have to upgrade your equipment for handling a huge quantity of work, then you don’t need to sell the existing equipment and can easily opt for replacements.
- Business owners can get the benefit of tax credits by deducting the monthly lease payments as business expenditures. Of course, every equipment lease is not the same and you may find hundreds of lenders around you. So, you need to be careful in choosing the best equipment financing provider.
- Equipment leasing can be a part of your business strategy of smarter business loans.
Things to consider when searching for a lender
A few things should always be considered when searching for a lender. Let’s have a look.
- Your monthly budget
No doubt, you have to pay lower monthly payments in leasing. But still, you need to analyze your monthly budget. First, see how much monthly payment you can afford for your equipment and then look for lenders accordingly.
- The period of usage
Leasing is a cost-effective way if you want to use the equipment for a short time period such as one or two years. However, if the equipment will be used for more than two years then a loan will be more beneficial. Do consider your business growth when making a final decision. Like if your business is evolving and growing rapidly then lease is a better choice.
- How fast the equipment will become obsolete
With the passage of time, technology gets outdated more rapidly in some businesses than others. Do consider obsolescence prior to making any leasing decision.
- Does your equipment qualifies for lease
Generally, a broad range of equipment is eligible for a lease. But still, you have to go through certain conditions to determine the eligibility of your equipment. For instance, most lenders have set a minimum purchase price that usually ranges between $25,000 and $50,000. Furthermore, the equipment you are leasing must be a hard asset such as truck, plant equipment, or machinery that has good resale potential and long-term value.
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