The benefits of leasing equipment versus buying it

Buying manufacturing equipment can add up quickly. Since this equipment is vital to your business, how can you find it for an affordable price? Buying equipment poses a lot of problems, here are a few you may run into:

1. Expensive start-up costs, which can take years to recover from.
2. Outdated equipment
3. Repair and maintenance costs

There is another option you have instead of purchasing equipment and that is to lease it. Unlike purchasing the equipment, leasing gives you a chance to acquire the brand new equipment for a lower cost and you don't have to deal with getting a loan or other annoyances. With equipment leasing, you are often in charge of dealing with routine maintenance but it depends on the company you are leasing it from as they may want to intervene and they will choose to do the maintenance in order to ensure that equipment maintains a high level of quality.

A lot of companies will give you the option to purchase the equipment at the end of your lease. You can also upgrade to new equipment if the equipment you are using is getting dated and you can get better production out of a new piece of equipment.

Leasing helps to free up cash for your business as you don't have an expensive loan to repay. Start-up companies use leasing as they often cannot acquire financing to pay for the new equipment. Right now about 8 out of 10 businesses actually use equipment leasing according to the Small Business Administration. That is because leasing can help any business, no matter how big or small.

In order to lease equipment you will need to agree to a monthly payment plan. It is somewhat similar to having a loan since you will have a monthly payment obligation you need to make. The difference is the payment amount is smaller and you are basically considered a "renter" of the equipment. Then at the end of your lease you can keep on leasing the equipment, buy it, or trade it in for new equipment with a new lease.

Leasing is attractive because you are only paying to use the equipment, you aren't held responsible for the equipment if it breaks down and needs expensive repairs. However the downside is since you are a renter, you don't actually own it so you can claim its depreciation amount on your taxes.

Think carefully before you sign a lease because once you sign, you are locked into the paperwork. Unlike a loan, you cannot cancel a lease. To get out of a lease, you have to pay it in full. This means you need to have a good look into your business finances and make sure you will have plenty of money coming in to support the lease in the future.

Leasing is used on just about every type of thing you can think of. A lot of companies use leasing for computer equipment while larger companies use it to lease large pieces of equipment like ovens, printing presses, etc.

Leasing offers so many great benefits, one of which is the ability to keep up with the latest equipment. Since new machines are being created, you want to consider how they will be able to help your business and what you can do in order to change your lease to get new equipment.

Always look at the various options that are available for your company and weigh the pros and cons to see which option is the best one for your business. A number of businesses have looked into leasing because of how it offers great equipment for a lower cost, making the equipment affordable for your business.