Many businesses move straight to financing equipment with a loan when considering upgrades that will be permanent. Equipment leasing is an option for long-term equipment acquisition, though, and often it is one that has distinct advantages over loans, even if you intend to keep and use the machines indefinitely. If you have never looked into leasing beyond limited-term products and machines that reach obsolescence quickly, you need to check out some of these advantages of leasing and consider what they would do for your next heavy equipment acquisition.
1. Leasing Costs Are Costs of Doing Business
Regular business costs like advertising and the items that contribute to the cost of goods and services are deducted from revenue before considering taxable income. That is the difference between revenue and income, after all. Equipment loans are asset loans, which means you need to calculate depreciating values and complete the appropriate tax assessments. That all disappears on a lease, and instead the whole cost is simply a cost of running your company like marketing or payroll.
2. You Can Lease With an Option To Purchase
Equipment leasing can be a path to ownership, particularly for equipment with a long operating life. Ask to negotiate a lease with a buyout option and most financing companies will jump on it. They simply adjust the lease to make sure it recoups the equipment’s value, and then you can choose to let it go for an upgrade or to buy it and keep using it once the term is over. This is especially attractive for expensive equipment if your provider will negotiate a long-term lease. Maximum lease terms vary by program, so shop around.
3. Equipment Installation and Removal Are Covered
When you buy equipment, you’ve got to consider the costs of placement and removal even if the transportation and delivery are covered in the purchase cost. Leasing is different. Since the financing company owns the asset and has an interest in maintaining it for future lessees if you don’t have a buyout and exercise it, they typically take care of everything to do with bringing it into and out of your shop. It reduces their risks and protects their investments, so it’s usually just included as a standard feature of equipment leasing.
4. Leasing Is Accessible
While leasing companies do typically run a credit check as part of the application process, the same is true of landlords and many other rental services providers. The fact is, in every one of those cases what is being checked out are specific red flags that indicate a high-risk applicant. The minimum score needed to land a decent price on a leasing quote is not nearly as stringent as for a bank loan. As a result, many companies that can’t find loan financing still wind up owning equipment thanks to lease buyouts.
