The Advantages of Leasing Equipment for Your Business
Leasing equipment will provide businesses with many benefits, such as no up-front costs and own risk. Obtaining equipment through a lease is one of the most efficient ways for businesses to stay at the top of the industry’s development curve. With the constant development of new equipment and technology, leasing equipment is substantially less expensive and allows you to keep your technology current.
Benefits of Leasing
Leasing equipment works particularly well if you are in a business where the technology is constantly changing. Purchasing equipment that will become obsolete in a few years is a problem that can be avoided by short-term leases that allow you to update your equipment at the end of each lease. If your equipment needs regular maintenance or breaks down easily, a lease with maintenance and repair included can be preferable to purchasing the equipment outright using a bank loan and paying for maintenance and repair on top of the debt payment.
Leasing equipment is much easier to finance than purchasing equipment. Banks usually require two to three years of financial records before extending a capital equipment loan to a business and some new companies that need equipment don’t have these records. Leasing companies, on the other hand, generally only require six months to a year of credit history before approving your office equipment lease. In addition, equipment leasing companies often don’t even require down payments, and instead, just collect a refundable security deposit. For equipment loans from banks on the other hand, a down payment of up to 25 percent or higher is often required.
Leasing equipment can make it easier for businesses to keep up with the latest in technology. Leasing is an attractive choice for those companies who rely on the most cutting-edge technology, such as communication devices and the latest in desktop computers. A series of leases that are short-term will cost less than buying new technology and equipment every year. Some leasing agreements will even include annual computer upgrades, thereby eliminating the need to contemplate whether you can afford equipment upgrades. Therefore, leasing actually gives you the capacity to afford more. Updated equipment will give your workplace a more professional appearance while boosting the employees’ morale and productivity.
Repair And Maintenance
Repair and maintenance is a major concern for any piece of equipment. A leasing agreement will help businesses avoid any costs for repair and maintenance. The leasing company, in most cases, will cover the equipment in the event that it breaks down, and the company will repair and maintain the equipment as necessary.
Most types of equipment leases can be counted as a type of business expense for tax purposes. At the end of the year, these amounts can be deducted to lower your business’ tax liability.
Tax Benefit Arbitrage
A firm that has an abundance of leases — equipment, machinery, automobiles, trucks, shipping containers, computers — can sell off any redundant and unusable tax advantages produced by all those leases. The method for doing this involves finding another company that needs tax write-offs. That company, the lessor, would buy the machinery and lease it to the first company, the lessee. The lessee would sell its extra tax advantage back to the lessor in the form of paying lower lease payments. It is a complex transaction that should be handled by your tax attorney or accountant.