What are Equipment Purchasing Factors and Equipment Lease Factors?

When examining equipment lease factors and buying factors, which can provide more options to your business?

equipment lease factorsEvery business owner wants a sense of freedom in running their business; as workers, they had a specific set of duties and could not surpass certain bounds. As a business owner, however, they are to be given full rein of their business as they choose, and they want the ability to run their business however they like.

However, when funds are only so much and starting a business demands funds in many different ways, options are cut down drastically. Company owners cannot get freedom and maneuverability in a business if they are so tightly restricted on funds, which is why seeking better alternatives that don’t cost you in the long run is wise.

This is especially the case with equipment; many companies rely very heavily on their hardware, and they need the best of the best. However, paying for good equipment is just another way your funds drain, and if you’re a business that needs quite a bit of equipment, like a gym or restaurant, it could cost you so much more.

There are two main alternatives businesses take, both with their own respective advantages and disadvantages, but most newer business owners still don’t know for sure which is the best path to take for their company.

So, what are the various equipment lease factors? Is purchasing equipment, with or without a loan, always the best move? What are the short term and long term factors of both?

How Purchasing Equipment Works

Purchasing can be very great for a business, depending on the equipment you get. Not only do you garner ownership of the hardware, which is great because it means you have full control over it, but you also can claim the equipment as an asset and get partial funding for it.

However, ownership of equipment comes with responsibility, and this is where it gets tricky for business owners. Over time, equipment is guaranteed to break.

Some hardware involves just a simple fix, while others are more costly. At some point though, whether it’s through professional recommendation or just looking at it financially, the broken equipment will not be worth repairing.

This means you scrap what you have and have to purchase the hardware all over again, and depending on the price of the equipment and how long it took to break, this can be very detrimental to a newer business. That’s the catch to owning equipment: you get to take responsibility for everything related to it, including the fact that all equipment depreciates in value over time.

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In addition, with the recent changes in technology, newer models are common, and many times your equipment will become outdated quite fast, meaning a replacement will be in order. Many companies will take out a bank loan so they can afford the equipment, and if they think they can pay it off with interest down the road, that wouldn’t be a bad route to take.

However, if you get stuck with equipment you need to replace for whatever reason and you haven’t paid off your loan, you’ve put yourself in a very tight spot financially, and your business may not be able to recover.

Equipment Lease Factors

The reason many business owners choose to lease is because it takes away the responsibility of owning equipment, and, with it, all of the downsides of having to replace the hardware right out of your pocket. Unlike a bank loan, an equipment loan does not carry interest; as long as you pay the low, flat monthly rate, the hardware is all yours to use.

Repairs are handled, and upgrades are not uncommon in leasing, especially if you renew your lease. A couple equipment lease factors include tax deductibles, which put money in your wallet every year, as well as open end leases, which means you pay for the value of the equipment.

Open end leases are a little riskier because the equipment can be worth less, meaning you pay, but you don’t have to get one. Leases are all about options, giving you the ability to get your equipment without completely draining your funds and allowing you to start your business the way you want to.

At the end of a lease, you can even choose to purchase the equipment from the business for a haggled price if you believe your business can do it, but many veteran businesses admit that they keep leasing equipment just because it’s so much more convenient for their company.

To learn more about equipment lease factors, click here.