3 Advantages to Leasing Equipment Instead of Buying
When it comes to the equipment your business needs to do its work, the best option is not always buying. It seems like it should be, because you can pay off the cost of the machine and then enjoy its use and the profit from its output without paying month to month. In reality, though, there are many machines with operating lifespans at or below the average length of the loan it would take to finance them. There are also times when you need a machine for a project, but you won’t need it once the contact is up, and in both cases equipment leasing is the best option. There are also advantages to using it outside those circumstances, though.
1. Control Your Tax Overhead
Buying an asset means claiming its value, calculating depreciation, and dealing with all the additional tax consequences that come with that paperwork. By contrast, a lease is considered one of the costs of doing business, like advertising. That means it deducts from your company’s taxable income completely, reducing gross taxable income by a dollar for every dollar spent. The right strategy for balancing leases and equipment purchasing can control your tax bill quite efficiently.
2. Save on Maintenance, Installation and Disposal
Equipment leasing is a service, and that means you get to expect the leasing company to do some of the work that comes with machine ownership. That usually means a portion of the regular maintenance and repair upkeep is covered by the owner and not the lessee, although the terms of that balance are highly variable. What is a standard, though, is the owner covering installation and disposal at the beginning and end of the lease. If you’re upgrading, just let one lease go and sign one for the new machines, then let the leasing company do its work.
3. Fast Approvals and Delivery Times
Unlike equipment loans, leases do not require your business to have a long established operating history, cash reserves, or even a major business plan. In fact, most of the time you can even access a lease if your business has no established credit at all. Equipment leasing is a service based on your ability to pay, not a long-term debt instrument. It approves quickly, without the red tape involved in equipment loans.
As a result, it’s often the best choice for any business that needs machines in place on short notice. That makes it ideal when you’re replacing vital pieces of your line that have gone down unexpectedly, gearing up for special projects, or just looking to close and move on quickly so you can get back to making money.
