The Benefits of Leasing Equipment vs Buying
Running a company is no easy task. Depending on the size of your company, you might require different equipment to run it effectively. This equipment can be costly to purchase, even more costly to maintain, and might become obsolete not long after it is installed. Here’s an in-depth look at the benefits of leasing equipment versus buying.
Affordable Monthly Payments and Better Cash Flow
When you decide to lease equipment for your company instead of buying it, you will likely get it for a reduced price. Because of the reduced price you will be paying a more affordable monthly rate on the lease. This is the most popular benefit of leasing versus buying equipment. By having an affordable monthly payment on the equipment, you can use the money saved elsewhere in your operating budget.
Managing cash flow is an important part of running a business. If there is no cash flow plan in place, it’s likely that the company will struggle financially not long after it opens. You will better be able to manage cash flow is you lease equipment for your company instead of buying it. A lease helps the company conserve capital so that it can be used for other purposes.
When a company decides to lease equipment instead of buying it, they are likely to benefit from longer terms. A lease can be renewed, but a purchase contract has a strict end date. A lease can also be extended prior to its expiration. Or, the company can negotiate a longer than normal lease from the gitgo.
Protection from Obsolescence
Many companies struggle with the idea that the equipment they buy could become obsolete not long after it is put to use. This issue can be fixed by leasing the equipment. In the lease, the company and the lender can insert a clause that matches the estimated lifespan of the equipment. This is typically done by providing add-ons and upgrades to the lease that can be activated if the equipment becomes outdated.
Tax benefits are important to companies of all sizes. That’s why many choose to lease equipment instead of buying it. Leasing equipment, if the lease is written properly, can lead to the company writing off the lease payments as operating expenses. This helps the company avoid having to capitalize the equipment and then depreciate it.
There are times when companies turn the lease of equipment into a purchase towards the end of the contract. There are plenty of purchase options out there, including fair market value purchase, $1.00 purchase, 10 percent purchase, and more.
Added Borrowing Capacity
A company that leases equipment will be adding borrowing capacity to its operations. The lease is done separately from other lines of credit, leaving those other lines of credit open for different operational needs.
Is your company in need of new equipment but operating on a tight budget? Leasing the equipment might be the best option for your situation. Contact the experienced team at Eastern American Technologies in New York to discuss our leasing options. The office can be reached at 718-937-3600.