Is leasing a good option for a business? What is the current interest rate for equipment lease versus an equipment purchase?
It is essential that businesses get the equipment setup they need in order to be successful. It’s challenging for a company to get everything they need, especially on start and with such limited funding.
Businesses need to hire employees, find a building and pay rent, acquire stock, and pay all sorts of other fees and expenses, and it’s tough to pay for all of this along with equipment. Business owners just starting out are limited to whatever capital they have, so affording everything, especially equipment, can be difficult.
Many businesses directly depend on the quality of their equipment for their overall performance, like gyms and restaurants, and getting the best possible hardware out of pocket can be tricky. However, there are multiple ways for business owners to get their equipment without immediately draining their expenses, like leasing or getting a bank loan.
Examining the factors of leasing versus purchasing (with or without a loan) is an absolute essential for any business owner.
For example, what is the current interest rate for equipment lease versus equipment loans? When is it better to purchase and when is it better to lease equipment?
Purchasing Equipment with a Bank Loan
There are circumstances where purchasing can be ideal for a business, especially for less expensive equipment. Mainly, issues with purchasing equipment come when you have to deal with consistently replacing expensive equipment after a few short years.
This is no problem with smaller tools, like silverware for a kitchen or dumbbells for a gym, because this hardware will last a fairly long time and is easy to acquire the funds to replace. However, the game changes for capital equipment, which is tough to pay for the in the first place.
Many business owners decide to purchase equipment just to get it over with, and just spend a large amount of money on their hardware thinking that’ll be all they’ll have to deal with. However, more expensive equipment like ovens for a restaurant is constantly being used and eventually breaks down, normally within a few years.
When that hardware breaks, you are forced to pay the full sum again to replace the equipment, and that may be money you don’t necessarily have. The issue with taking out a loan is that eventually you have to pay it back with interest, and that completely depends on the interest rate and the amount you’re loaning.
Even if you have good credit and get a fairly small interest rate, capital equipment is expensive; meaning the interest you pay back will have to be relatively large, making it even tougher to pay off.
Worse, what if you take out a bank loan, buy equipment, and, when the time comes to replace the equipment, you still haven’t paid the loan off? You’re stalling paying that loan for that much longer, and digging yourself deeper into debt.
Looking at the Current Interest Rate for Equipment Lease
There are many reasons to get a lease for your business, especially when you need to get capital equipment and have trouble getting the proper funding. With so many expenses to deal with for your business already, it’s fairly convenient to have a way to get equipment in your business without paying too much.
A lease involves paying a flat monthly rate to get equipment loaned out to you for a period of time (normally a few years). Leasing is convenient because not only is the rate low and easy to pay, but the current interest rate for equipment lease is zero, meaning you pay the same amount at the start of the lease and end of the lease.
You can also get tax benefits on your lease, putting money in your pocket every year come tax return time. Leasing is a contract as well, meaning you can get deals instilled in the lease to make the process of leasing equipment easier for you.
For example, you can get equipment furbished and sent back to you without having to pay to replace the equipment, and you can get upgrades on your equipment if you continue your lease. To learn more about the current interest rate for equipment lease, click here.