How do the pros and cons of leasing equipment help you determine whether or not you should get an equipment lease?
Running a business is considered the high point in any trade, whether you’re an engineer, a doctor, a farmer, or a fitness trainer. No matter who you are, everyone likes to be their own boss and set their own path.
However, running a business requires more than just experience in your trade. You need to be able to deal with people, manage finances, and keep everything in your company together in such a way that your business goes in a positive direction.
This can be challenging when your company first starts, simply because you need to get everything for your business with a limited capital. Your company still isn’t making money and needs to be set up without you worrying about putting yourself into debt.
It’s important that your company get set up right as well, so you can make as much of a profit as possible as soon as possible. Running a business is no easy feat, and many believe that it is made easier through equipment leasing.
With a lease, businesses pay a monthly rate to have hardware loaned out to them, allowing them to not worry about paying high costs up-front for capital equipment. However, many companies want the ability to own their equipment and will take out a loan or find some other way to purchase their equipment.
When looking into purchasing and leasing, what are the advantages? What are the pros and cons of leasing equipment compared to purchasing?
Pros and Cons of Purchasing Equipment
With purchasing, businesses do get advantages as far as getting some funding right off the bat. However, owning equipment isn’t necessarily advantageous over time.
If you buy your equipment, it doesn’t mean you make the one purchase and that’s it. You’ll have to purchase the equipment again at some point, especially considering capital equipment breaks down fairly quickly.
Repairs are often not the best solution because they cost too much; usually it’s financially smarter to just purchase equipment again, meaning you’re paying for capital hardware a few years after buying the initial equipment.
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Purchasing some equipment can be helpful depending on the cost of the equipment and amount of funding you can get, but paying for more expensive equipment can be extremely difficult, even with a loan.
Bank loans have interest attached, and if you take out a large bank loan, the interest rate will be high. Dealing with that interest rate can be nearly impossible with capital equipment, especially when your equipment breaks and needs to be replaced.
What are the Pros and Cons of Leasing Equipment?
There are both pros and cons of leasing equipment, and they all depend on what you’re leasing and whom you lease it from. With an equipment lease, you pay a low flat monthly rate to have equipment loaned to you for a period of time.
You don’t have to worry about interest or large payments, and with leasing you get a fairly long-term solution to getting equipment in your business. Leasing has other advantages spread throughout the leasing contracts as well, like tax benefits that work differently every year but still end up putting money in your pocket come tax return time.
There are also ways to get your equipment upgraded in a lease, most notably when you renew a lease with a leasing company. However, all leases work differently and completely depend on the contract you get versus the type of contract you need.
For instance, you don’t want to get an equipment lease designed for an older business if your company is just starting and needs a different type of equipment lease. There are cons of leasing equipment, mainly if you get a lease that isn’t ideal for your company, but there are easily workarounds.
As long as you know what you want out of your lease and shop around for that ideal lease for your company, leasing can be extremely beneficial to you. To learn more about the pros and cons of leasing equipment, click here.