What is leasing? Why do companies lease supplies instead of purchase them?

Running a business is considered the ultimate challenge in any trade, because not only do you have to be a professional in your trade but you also need to manage the overall setup of a company. You need to be able to manage employees, keep track of finances, make sure everything in your business runs as well as possible, and more.

It’s fairly challenging, but the bottom line of running a business is that you get to reach a new level of experience in your trade and you get to take your company in the direction that you want.

The hardest part about running a business is always considered to be your finances because everything in the company ties back to how much money you’ve earned versus how much you need to spend.

Companies have quite a bit of expenses to deal with, from paying for employees to purchasing stock and buying a building and dealing with countless expenses and bills.

Affording everything for a business is tough, which is why so many businesses end up leasing their more expensive equipment in order to get everything they need in a cost effective manner. However, many business owners do want to know why do companies lease supplies instead of purchase them.

Advantages and Disadvantages of Buying

Purchasing your equipment can be easy or difficult depending on what equipment you purchase. There are advantages like the ability to claim the equipment as a business asset, allowing you to get some funding for it.

Depending on the cost of that equipment, that initial purchase can easily be affordable along with that funding. However, many business owners do not take into account the other big factor about owning equipment: its longevity.

That equipment is not going to last forever, and some equipment lasts longer than others. The problem with purchasing equipment for a business is that most companies require equipment that’s fairly expensive and doesn’t have much longevity to it.

That means that not only do you spend a lot of money purchasing the equipment to begin with, but you will have to make those same payments in a few years when the equipment inevitably breaks down. Some business owners will try to use bank loans in order to have less trouble affording the equipment, but loans can make expensive equipment purchases tougher.

The main factor to a bank loan is the interest rate, which is the amount you pay back in addition to what you loan out. The interest rate is a percentile of the amount you loan, so no matter how low that percentile is, if you loan a large amount of money you are still paying a large amount of interest.

Why do Companies Lease Supplies?

Leasing is considered an effective move for businesses looking to get expensive equipment, simply because you’re not paying for the equipment but the ability to have the equipment in your business.

With equipment leases, you pay a flat monthly rate and equipment is yours for the contract period. Many business owners want to know why do companies lease supplies, and the answer is that they don’t have to worry about any tough payments with leasing but also get expensive equipment in their business.

Equipment leases mean you don’t have to worry about large payments or interest rates at any time; just flat payments that are much more manageable for a business.

There are other benefits to leasing as well, like getting the ability to have equipment repaired when it breaks down versus paying to replace the equipment.

Leasing also has tax benefits as well, putting money in your pocket every year come tax return time. To learn more about why do companies lease supplies, click here.