The following is a list of pros and cons that you should take into account before deciding to lease equipment.
The first is property. The biggest disadvantage is that at the end of the contract, you are not the owner of the equipment. Obviously, this may very well be an advantage, especially in the case of computer equipment where the technology changes fast.
The other is the total expense. Equipment leasing is almost always more expensive than purchase, assuming that you do not a loan in order to buy it. For example, leasing a computer system for three years is $5000 (with a regular fee of $40 a month times $1000) would cost you a total of $7200.
Financing search. Being granted a loan is a long and difficult process. On the one hand, a financial institution will demand documentation that shows them your credit history for the past two to three years. On the other hand, an equipment leasing company will only ask for your credit history of the previous semester. This is clearly an advantage of equipment leasing.
Another advantage of equipment leasing and probably the main reason why people opt for it is the increase in working capital. Naturally, leasing equipment will cost you less money on the first month than buying it. After making a substantial purchase, you reduce the amount of money you have to go about your daily activities.
Equipment leasing also allows you to reduce the value in the books in concept of equipment, meaning that your payments for the leasing of the equipment can be registered as commercial expenses and therefore pay more in taxes
Technology needs: the technology is advancing by leaps and bounds. If you purchase a computer or high-tech equipment, in 2 or 3 years you may find yourself with outdated equipment, without perceptible resale value. Leasing allows you to test new equipment configurations and update your system regularly to stay on top of the technological curve. On the other hand, if you have a policy of "transfer" in your company (where the older technology is used by some departments), the purchase may be more effective.
The first is property. The biggest disadvantage is that at the end of the contract, you are not the owner of the equipment. Obviously, this may very well be an advantage, especially in the case of computer equipment where the technology changes fast.
The other is the total expense. Equipment leasing is almost always more expensive than purchase, assuming that you do not a loan in order to buy it. For example, leasing a computer system for three years is $5000 (with a regular fee of $40 a month times $1000) would cost you a total of $7200.
Financing search. Being granted a loan is a long and difficult process. On the one hand, a financial institution will demand documentation that shows them your credit history for the past two to three years. On the other hand, an equipment leasing company will only ask for your credit history of the previous semester. This is clearly an advantage of equipment leasing.
Another advantage of equipment leasing and probably the main reason why people opt for it is the increase in working capital. Naturally, leasing equipment will cost you less money on the first month than buying it. After making a substantial purchase, you reduce the amount of money you have to go about your daily activities.
Equipment leasing also allows you to reduce the value in the books in concept of equipment, meaning that your payments for the leasing of the equipment can be registered as commercial expenses and therefore pay more in taxes
Technology needs: the technology is advancing by leaps and bounds. If you purchase a computer or high-tech equipment, in 2 or 3 years you may find yourself with outdated equipment, without perceptible resale value. Leasing allows you to test new equipment configurations and update your system regularly to stay on top of the technological curve. On the other hand, if you have a policy of "transfer" in your company (where the older technology is used by some departments), the purchase may be more effective.
About the Author:
Wade Henderson - very Professional - 15 yrs in the Business Finance Field - strong reputation for getting the deal done. IMMFinancial.com Application Software Leasing Automotive Equipment Leasing
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