Equipment Leasing Solutions

Benefits of Equipment Leasing

There are a number of reasons why equipment leasing may be smart for your business. Leasing is a form of financing similar to renting, where the lessor owns the equipment until the end of the lease term, at which point the lessee commonly has the option to purchase. In some cases of heavy capital expense, leasing holds a number of legal and financial advantages.

• Reduced Upfront Expenses.

  An equipment lease is paid for over time. These payments depend on the length of the lease term and interest rate applied to the lease. Payments often occur monthly, sometimes with deferred flexibility.

• Tax Benefits.

  Although the total amount paid for the leased equipment is greater at the end of the lease than if the equipment had been purchased at the time of acquisition, each payment is a capital expense and might be 100% tax deductible in each fiscal year an equipment lease payment is made.

• Low Risk Interest.

  Equipment leasing generally offers a fixed rate of interest, avoiding the risk of market fluctuation. The cost of each payment is decided at the beginning of the lease agreement and does not change.

• Low Obligation.

  The lessee also waives obligation to retain the equipment if depreciation over the lease term was extensive enough to decline a buyout option. This alleviates the lessee from the inconvenience of disposing of obsolete equipment.

• Flexibility.

  Equipment leases come in a variety of packages and can cover not only the cost of equipment, but also installation or any other services required. A lease program may also be tailored to your business’ specific needs. Options to purchase the equipment from the lessor at the end of the lease term also exist, sometimes for as low as one dollar.

It is important to weigh all options to determine the best course of action for your company’s future. Generally you should understand your plan for the equipment; equipment leasing has advantages when you want a piece of equipment without having to own it or that will depreciate in value. Remember that the value of most equipment is in its use and not in its ownership.

Equipment leasing is not optimal in all situations. Leasing equipment generally is not as beneficial for equipment that may have a relatively low cost or solid residual value. It is also important to see if your company can comfortably afford a large expenditure and whether the cost of interest on the equipment lease outweighs the tax benefits or capital gain.