15 Reasons To Lease Equipment

1. Use of Equipment Leasing Is the Use of an Asset. No business pays its employee’s salaries in advance; businesses pay people as they contribute. It should be no different with a contributing asset like business equipment. Leasing enables you to pay as you use.
2. Fixed Payments. Monthly payments on a lease are generally fixed for the entire term of the lease. This is a distinct advantage in times when many financing transactions have floating interest rates. Knowing in advance what your payment will be enables you to budget and manage equipment dollars for a long time.
3. Longer Terms. Many banks only lend money short term, usually 12 to 36 months. In lease arrangements, the term can be as long as 60 months, and in some cases even longer.
4. Protection From Obsolescence. Industry analysts say technological advances could make today's equipment obsolete in a very short period of time. This is especially true with computers. Leasing lets you match the term to what you perceive to be the equipment's useful life. You pay for the equipment only for the period of time that you feel the equipment is really working for you. Many lease plans also have a provision for upgrading as required.
5. No Down Payment. Most traditional financing options require a sizable down payment. On cash purchases this can be as much as 20 percent. No down payment is required on a lease.
6. 100 Percent Financing. Traditional methods of financing usually do not include “soft” items such as installation and freight. A good lease transaction includes both of these, thereby allowing you to finance the total package.
7. Flexibility. Leasing provides a lessee with greater structuring flexibility. The leasing industry is typically populated by aggressive entrepreneurs who find ways to structure lease transactions to fit the needs of their customers. This gives a lessee the opportunity to make the most of such lease structuring variables as number and amount of advance payments, purchase option, etc.
8. Simpler Than Bank loans. Leasing programs and procedures are designed to take the red tape out of financing capital equipment for business.
9. Purchase or Renewal Options. Most lease arrangements allow customers the option to purchase at a stated amount or at fair market value, or to renew the lease at a reduced monthly' payment. The lease structure determines which of these options is available.
10. Conservation of Capital. Because of the sizable cash outlay involved in purchasing new equipment, many businesses lease to conserve capital. Money is better used to buy inventory, advertise and hire personnel than to purchase equipment that is worth less and less as time goes by. If you are in a business where you have important alternative uses for money on hand, leasing always wins out in the "lease vs. buy” analysis.
11. Easier Cash flow Forecasting. Leasing, which is simply dollar-per-month financing helps equipment users fit a monthly payment into their budgets. Because payments are fixed, users can continue to intelligently budget into the future.
12. Ability to Work Within Budget Limitations and Around Corporate Purchasing Committees. Subsidiaries of large corporations or department managers of small companies have the authority to acquire equipment they need, but only if it fits within operating budget guidelines. Many managers decide to acquire needed equipment via leasing because it allows them to have the use of the equipment (which is all they really want) and still work within operating budget limits. They don't have to go to capital expenditure committees for approval
13. Tax Benefits. Lessees can usually deduct their monthly lease payments as operating expenses. This clearly reduces the net cost of the lease. Leasing is generally advantageous to most businesses. Nevertheless, it's always best to talk to your tax accountant first. Under the current alternative minimum tax rules, ownership of equipment triggers depreciation, which is a tax preference item.
14. State-of-the-Art Equipment. When dollars are already budgeted, managers who need newer equipment can conveniently acquire that equipment on a dollars-per-month basis since the monthly payment precedent usually has been established.
15. Respond to New Business opportunities. Leasing your new machinery and equipment will allow you to preserve your existing cash flow to respond to new business opportunities. The profits generated from the productivity of the equipment is usually greater than the lease payments.