Leasing is becoming the newest wave for many small businesses, owners who want to have the best possible equipment to run their business without expending unnecessary capital. Of course the old argument about leasing versus buying is still alive and quite well, so it becomes necessary every now and again to examine the pros and cons of both options.
Leasing Equipment (Advantages)
There is far less initial expense upfront when leasing business equipment, and it allows you to acquire assets with minimal financial outlay. Business equipment leases rarely require a down payment, which leaves cash flow intact.
Lease payments are often tax deductible as business expenses, reducing the net cost of your lease.
Leases are easier to obtain and often have more flexible terms than loans for buying business equipment. This is a great advantage if you are dealing with a bad credit score.
Leasing also provides you with the opportunity to upgrade to the newest model, and this can be vital when working with computers or other high tech gadgetry.
Leasing Equipment (Disadvantages)
Leasing a piece of business equipment is almost always more expensive than purchasing it. A computer worth $4000, leased at a standard rate of $40 per month per $1000, will end up costing $5760. Buying it outright would have cost $4000.
You also do not own the equipment, and there is no equity that can be built up. Lack of ownership may be a serious disadvantage in some scenarios.
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You are also tied to the lease for the duration of the term, and must make payments for the entire leasing period even if you stop using the equipment. While some leases do provide an option to cancel if the business changes direction and the equipment is no longer necessary, in most cases you end up tied to the lease until its term is up. Even in cases where lease cancellation is an option, it is almost always accompanied by a fairly stout termination fee.
For the best case scenario, contact the equipment leasing and financing professionals at LeaseQ, one of the largest providers of business equipment leasing in the United States. They offer leasing options for all types of companies, not just small business owners, but also international corporations. The approval process can be done online and only takes about two minutes.
In our next installment we will examine the pros and cons of purchasing business equipment.