Equipment Leasing: A Comparative Guide
When it comes to running a business, having the appropriate equipment is paramount to the success of a business. Unfortunately, equipment can also be rather expensive and a variety of costs must be considered when budgeting for them. Equipment can be costly not only to obtain but to repair, replace and maintain as well. Equipment leasing is a common alternative that should be considered before making a purchase.
What to Consider
There are many factors to take into account when deciding between leasing or purchasing equipment. These can include how often a type of equipment needs to be upgraded, maintenance and repair costs as well as how frequently it is expected to be used. It is also important to think about what the purchase price and monthly lease payments will be. By taking these things into account, businesses can confidentially choose which option is right for them.
Why Choose to Lease
For those who need a piece of equipment that frequently needs to be upgraded or repaired, the best option would probably be leasing. This is because the cost to continually purchase the equipment would be far greater than the cost to lease the same equipment. This is also true for machines that are not used frequently or are only required for specific projects.
Choosing an Operating or Finance Lease
Once a company has decided that equipment leasing is the right choice, it is also important to consider whether to use the equipment with an operating or a finance lease. In both situations, the business leasing does not own the equipment and the lessor is providing the equipment for a specific amount of time. In the case of an operating lease, the equipment is not considered an asset by the leasing company but is instead considered a rental expense. They key way in which they differ is that in the case of a finance lease, the lease is considered an asset for the leasing company.
Purchasing and leasing equipment both have their pros and cons. For businesses that do not have to be concerned with equipment becoming obsolete or non-essential to their business needs, purchasing might be the best option even though it can be expensive. For business owners who do not want to handle the repair, maintenance, and upgrading of equipment, equipment leasing might be the best choice. It is important for business owners to take several things into consideration before making a decision about how to obtain their business equipment.