The Advantages and Disadvantages of Leasing Capital Equipment

How can the advantages and disadvantages of leasing capital equipment help you determine the best setup for your business?

advantages and disadvantages of leasing capital equipmentSome of the toughest equipment for businesses to deal with is capital hardware, especially for smaller and newer businesses. Getting all of the necessary equipment for a business is absolutely a necessity, and the more efficient the equipment the better.

However, as a business you already have to deal with so much spending, from your stock to your location to your employees and more. Businesses have a plethora of expenses, and making sure your income covers this is very important in the success of a business.

When your company’s just starting, you have little to no income and depend solely on whatever capital you have, and using that limited funding to pay for such expensive equipment can be extremely difficult. That’s why businesses look into the different advantages and disadvantages of leasing capital equipment, determining whether they should get their equipment loaned to you or not.

Many business owners don’t like the idea of leasing and have heard bad stories about it; they’d rather just suffer the consequences and want to own their equipment.

However, there are advantages and disadvantages of leasing capital equipment and purchasing your capital equipment, and the comparison can easily help you determine how you should acquire your equipment.

Factors of Getting an Equipment Lease

There are quite a few factors to a lease, because getting a lease means more than just than equipment itself. Capital equipment is always much more complicated to deal with than other types of equipment because of how intricate and complex it is, so a lease is designed to fit the needs of capital equipment.

With a lease, you pay a flat monthly rate for the loaning of the equipment, meaning you don’t have to worry about interest rates or high, up-front payments. This system is much more convenient for smaller businesses and newer businesses because they can easily afford the more expensive equipment that they need.

The lease period and rate are normally pre-determined in the contract between you and the leasing company, and there are other factors to the lease that are pre-determined as well. For instance, repairs are handled by the leasing company, and some system needs to be set up as far as equipment repairs and such.

Plus, many businesses will offer you upgrades on your equipment so you get the newest technology, either during the lease (if it’s a long lease) or if you continue an expired lease. Many businesses will even make a deal with leasing companies and purchase the equipment after the lease expires at a haggled rate.

Advantages and Disadvantages of Leasing Capital Equipment versus Purchasing

There are advantages and disadvantages of leasing capital equipment because you can get all of the capital equipment you need without overspending. However, not all leases are perfect for a business, and finding the ideal one is a necessity.

Sometimes, purchasing isn’t a bad option, but generally it’s not very helpful with capital equipment. You do get funding by claiming the equipment as a business asset, but having to deal with repairs and replacements can be a huge hassle.

Acquiring Capital Equipment for your Business

Capital equipment is generally more complex and intricate, meaning if you’re using it on a daily basis, chances are it won’t last very long. Dealing with the repair/replacement costs as a relatively new business can be extremely detrimental to your financial situation and expansion of your business in the long run and this can be made worse with a bank loan.

When taking out a loan to pay for capital equipment, you’re loaning quite a bit of money, and even a low interest rate accumulates quite a bit of interest considering the amount you’re loaning. However, a lease that doesn’t suit your business can be even worse, putting you in a hole financially.

Your lease needs to fit your business needs, whether you want a lower rate or a longer contract for better deals later on, meaning you have to shop around for a good lease.

There are both advantages and disadvantages to leasing capital equipment, but with the right lease your business can easily run much more efficiently. To learn more about the various advantages and disadvantages of leasing capital equipment, click here.