(Newswire.net — June 14, 2022) —
Businesses usually require a wide range of equipment for their day-to-day operations. This includes computers, printers, photocopiers, plant and equipment among other things. While some businesses may have the capital needed to buy these equipment, others do not. Whatever the case, business owners should look at all the available options before deciding to commit their capital. Instead of buying equipment, business owners should consider leasing as there are many benefits of leasing. However, not all businesses should lease equipment as buying may be more beneficial in some cases. Additionally, you can easily get finance for used business equipment. This means that the main options available to business owners are leasing equipment, buying new equipment and leasing equipment. Keep reading to learn about the benefits of leasing your business equipment.
What is Equipment Leasing?
This is an agreement between the lessor and the business requiring the equipment (lessee). In this agreement, the business owner agrees to pay a lease fee, either in lump sum or in installments, to use equipment for a given period of time or term of the lease. After the lease period expires, the equipment is returned to the owner. Similarly, if the business fails to pay the agreed lease fee, the equipment will be repossessed by the owner. It is important to note that the leased equipment is fully-owned by the leaser. The following are some benefits of leasing equipment vs buying:
1. Free-Up Your Capital
When you buy equipment, you will be committing a lot of capital, which will be tied up in the equipment for years. This capital should be invested in other important expenditure items, such as marketing, promotional sales and the likes. Besides, some businesses may not have the capital needed to purchase costly equipment, so leasing may be the only option.
2. Avoid Obsolescence
Technology usually becomes obsolete quickly nowadays. For instance, new computer hardware and software products are always being released to the market almost on a daily basis. If you buy new equipment, you may find yourself with a long list of assets that have become obsolete, which will force you to either sell them or put them in storage to make room for new equipment. To avoid obsolescence, consider leasing equipment because you can always get a newer model at the end of the lease period.
3. Leasing Has Higher Returns on Investment
Leased equipment can be used to generate more revenue, which can be used to pay the lease fee. Since the capital invested is small, and is dragged out over an extended period, the returns from that small investment are high. On the other hand, when you buy equipment, you are forced to invest a lot of capital, whose returns will be mediocre at best.
4. Tax Benefits
Businesses that lease equipment enjoy a lot of tax benefits. For starters, they can claim a tax deduction for all the lease fees they pay. This can significantly reduce the tax liability of a business. It is important to note that leased items are not listed under assets or liabilities, which makes accounting easier.
5. Greater Flexibility
Businesses usually have high and low seasons. The main benefit of leasing equipment is that a business can lease more equipment to use during the high season and lease fewer equipment during the low season. This can save the business a lot of money and ensure the rate of return is always high. When a business buys several pieces of equipment to meet the demand during the high season, it will have to park some of the equipment during the low season when only a few pieces of equipment are needed. This kind of flexibility is great for business.
When looking for equipment to lease, be sure to pay attention to the condition of the equipment, lease fees and the T&Cs that come with the equipment. This will help to ensure you get the best results.