All companies need equipment, but when examining equipment lease to purchase rates, which is the better way to save money and get good equipment?
All companies need some kind of effective equipment setup in order to run properly, whether they just need computers to keep track of finances or heavier duty hardware like tractors, kitchen equipment, treadmills, and more. It all depends on the type of company, but almost every business needs to purchase smaller hardware that’s fairly affordable, while many require much more expensive equipment.
There’s a certain level of responsibility attached to purchasing equipment, as all hardware must be maintained to improve its life. Even so, depending on the amount of usage and the quality of the equipment, you’ll end up having to jump through certain hoops to take care of your equipment.
Add on the fact that you have to generally pay everything up front to buy equipment, and many newer businesses that need expensive hardware begin searching for alternatives. Some alternatives, like bank loans, involve money you borrow, while leasing, an equipment based loan, involves paying a monthly rate to have the hardware loaned out to you.
That’s why many business owners that need their equipment now examine the equipment lease to purchase rates to determine which choice is the best for their business financially, both in the present and in the future.
Purchasing Rates for Equipment
Purchasing equipment means that you’re taking on full responsibility for the hardware: you’re going to maintain it, handle it as it falls into disrepair, and deal with the consequences if you need to replace it for any reason. This can be no problem for smaller equipment: if your company owns an electric drill and it, for whatever reason, breaks, covering the cost of replacing it isn’t an issue.
However, if your company owns a heavy duty oven that costs you a great deal of money and that breaks down, what do you do? You can pay to repair it, if the cost is reasonable, but that won’t last.
All equipment, over time, decreases in quality and falls into disrepair, and the hardware will eventually reach that point where purchasing new equipment is fiscally wiser than repairing your current equipment. This is fairly devastating for companies, especially when they’re newer and the equipment breaks within a few short years.
It takes a while to get on your feet financially and start becoming a formidable competitor in your respective industry, and important equipment breaking can be a huge setback.
Other Factors in Financing and Buying
If you decided to get a bank loan, a bad situation could end up being even worse for your business. If you got a decent loan with a low rate and managed to pay it off quickly, that’s one thing.
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However, if paying off your loan isn’t as quick as you think, your equipment could break before you pay off the loan, setting you back even more as far as paying off your debt and only increasing the interest and amount you’ll have to pay. Purchasing does have its benefits, like getting to claim the equipment as an asset and getting funding for the hardware; purchasing equipment can be a good choice depending on the equipment.
However, heavier duty equipment and more pricey equipment that isn’t guaranteed to last very long before breaking isn’t the best for a purchase. With a lease, the burden of continually paying for hardware no longer exists; all you do is pay a flat monthly rate and the hardware is yours for the duration of the lease.
You also get options throughout the lease like tax deductibles, upgrades on your equipment, and the ability to get hardware repaired for you at a low rate.
Equipment Lease to Purchase Rates
However, everything related to a good lease depends on the lease contract, and this is where leasing can get more risky. If you want a good lease, you need to know the definition of a good lease for your business as far as contract period, lease rate, and deals like equipment rate that come in the lease.
You don’t want to get a long lease on equipment you don’t need and end up getting overcharged, forcing you to either wait out the lease or pay a high cancellation fee to get out of the contract. Examining equipment lease to purchase rates, equipment leasing has small monthly payments, but they do add up.
Still, depending on the equipment, purchasing requires more than just that large, initial payment; you may have to pay for repairs multiple times just to get you through the first few years. Looking at the equipment lease to purchase rates depends on much more than the actual payments; it’s how much it will cost your business in the long run, and whether that equipment is worth the frustration of purchasing if you can’t handle repairing it.
Many business owners will lease at least some of their equipment to make finances easier on them and get a good deal. To learn more about equipment lease to purchase rates, click here.