A Step by Step Guide on how Equipment Leases Work

A few tips on how equipment leases work to your new business’s advantage.

how equipment leases workAs a business owner starting up your very own, brand new company, money is most likely your big issue and you’re probably looking for any solution to save you on the bills and to give you an advantage in launching your business.

Fact of the matter is, new businesses deal with a great deal of competition just trying to get a beginner’s piece of the market, and you need every edge you can possibly get on your competitors.

There is a process to starting a business, from location to advertising to paying all the bills and for the employees you need, and having to pay for equipment becomes a huge, necessary expense. As important as a good location and hard working employees are, you need the best equipment possible, whether you’re starting a restaurant or a gym or an orchard, and that’s where leasing comes in.

Equipment is normally the final place where business owners decide to take out a loan, but why not learn how equipment leases work instead and use those to save you money on down payment? Plus, if you get good equipment and a good lease, you can potentially have an edge on your competition equipment-wise and financially.

Buying your Equipment: What’s the Catch?

Many business owners just prefer taking out a loan on paranoia of a bad lease; they don’t understand how equipment leases work and want to take advantage of the upsides of buying equipment. While there are some advantages to buying your equipment, it’s not hard to see that many situations don’t call for buying your equipment, and that one bad decision can become a huge liability for your new company.

The advantage of buying equipment is basically the fact that you can claim it as an asset, allowing you to get tax incentives; the more expensive the equipment, the more money you save when the yearly grind of taxes comes around.

Ownership is normally the big advantage for business owners; they want to know that the property’s theirs and they can use it however they please, but if that ownership becomes a burden, then they just spend a big chunk of money on something useless. This happens often to business owners; they spend a lot of money on something only for it to break easily, become useless after a couple years, or simply easily get outdated.

If you can find good, long lasting equipment that doesn’t really change technology wise at a low cost, buying the hardware isn’t a bad idea, but normally leases are the better way to go.

How Equipment Leases Work

Leasing is a form of a loan, but it’s much simpler and easier to handle than a loan. Leases have a contract period that is predetermined, and during that period you are obliged to pay a flat, monthly rate on the equipment, along with the down payment.

This spreads the cost out over time, and if it’s equipment you don’t need to buy it becomes a big advantage. In addition, if you want to buy the equipment at the end of the lease, you can, or you can upgrade it, continue the lease, or return the equipment, and all of these factors are also predetermined in the contract.

There are other factors involved with an equipment lease as well, such as the termination fee if you decide to bow out before the end of the contract, or the monthly rate itself.

How can I Avoid a Bad Lease?

Many business owners are wary of leases for all the wrong reasons: they hear horror stories of others getting stuck in a bad lease and having to pay a huge termination fee to get out of the lease. The fact of the matter is, leases are like anything else: they are contracts, and they are both good and bad.

Getting a good lease is not challenging; it requires a little bit of research and patience for the best deal. Don’t settle; many business owners get long-term leases on equipment they don’t need and end up paying far more in the long run.

Leases have huge advantages, like getting tax deductibles, or getting more upgrades on your equipment, but you have to go out and get these deals that you want.

Leases aren’t something you can jump into feet first; but as long as you know what you want out of your equipment and what you want to pay over the long term, you know how equipment lease work to your advantage. To learn more about getting a good lease and how equipment leases work, click here.