When it comes to leasing vs financing equipment, which is the better move for your business?
As a business owner, the first thing you’ll learn is that you have to work hard, move fast, and make sure you’re ahead of the competition and as up-to-speed on your finances as you can be. Whether you’re a restaurant or a gym, cleaning business or delivery business, you need to have the best running start you can get, staying ahead on your finances and beating out your competition in any ways you can.
That’s why having an edge in the form of your equipment can be so great for a business: oftentimes, businesses have to pay ridiculous amounts of money just to get half decent equipment that will eventually break down or become outdated.
Leasing allows businesses to pay much less to get refurbished equipment that can be upgraded over time, allowing businesses to save money and get a jumpstart on their competition hardware-wise.
On the other hand, leasing does have its drawbacks compared to buying the equipment, and many business owners try to get financing so they can buy the equipment instead. Many business owners look at the cases of leasing vs financing equipment, trying to determine which is the best avenue for their company overall.
The Process of Leasing Equipment
Leasing is a system that many business owners misuse, leading them into vast amounts of trouble with their company. A lease is, essentially, a contract, and like any other contract, there are good deals and there are bad deals, so the important part of a lease is you doing your homework and making sure that you don’t settle for anything less than the most suitable lease available.
The way a lease is set up, you get to pick the equipment you need, and you get a set period of time for the equipment to be leased to you, a flat monthly rate, a cancellation fee, and other various factors of the contract.
The lease you get should depend on the equipment you get; oftentimes, business owners get a long lease on equipment that won’t last or they won’t need for that long, and they end up having to pay a long cancellation fee to get out of it. Leasing has many benefits; you just need to be able to take advantage of them.
For example, do the math before you get a lease and you can see just how much money you’ll save in the long run. In addition, leases can be deducted as an expense from your business on your returns every year, and with a lease you can upgrade and get the best equipment possible versus having to buy less effective equipment.
How does Financing Equipment Work?
Financing, like leasing, is all about getting the best deal and working with the options you have. Getting financing for your equipment involves making sure you don’t bite off more than you can chew in the sense of having interest rates that make your loans too high to pay off anytime soon.
However, financing equipment, unlike leasing equipment, allows you to buy the equipment, giving you complete ownership of the equipment, which is both advantageous and disadvantageous.
Having ownership of the hardware is completely beneficial in the sense that, if the equipment isn’t outdated and can last a while, you have it for life. In addition, buying the equipment allows you to claim it as an asset; so there are some advantages in buying the equipment, but having a loan can be more risky than a lease, especially considering the type of equipment you buy.
Should you be Leasing vs Financing Equipment?
There are advantages to both leasing and financing equipment, and every single case has to be carefully considered before you do one or the other. For instance, you shouldn’t lease equipment that won’t last long or will be outdated if you plan to keep that equipment for a long time or plan to get a long contract.
Also, if the lease costs too much over time, buying the equipment might be the right move. However, many businesses can’t afford to buy the equipment and don’t want to take out a loan, which is exactly what leasing is for.
Leasing vs financing is always case-by-case: what kind of company you are, what kind of deals you can find, and what equipment you need. If you want to learn more about how you can lease and/or finance equipment, click here.