Pros and Cons of Equipment Leasing
Equipment leasing seems logical for many business owners, but like anything, it has some disadvantages. Considering both the Pros and Cons of Equipment Leasing will help you make the right decision when deciding between leasing over buying.
Below are some of them:
Pros of Leasing Equipment
- Lower initial expenses – perhaps one of the top benefits of leasing is the fact that you’ll have lower initial expenses. This means that you can acquire new equipment without having to spend large amounts on a down payment, thus maintaining your cash flow and avoiding the need to tie up large amounts of capital in an illiquid asset.
- Tax deductible – Because your lease payment can usually be deducted on your taxes, it can further save you on annual costs and justify the use of a lease structure. When financing your equipment purchase, your tax deductions are more limited .
- Warrantied equipment – You further lower your overhead costs by acquiring warrantied, new equipment. If anything goes wrong, you are typically not liable for repairs/maintenance costs, as long as the equipment you lease is still under warranty.
- Flexible payment terms – Leases can often have much more flexible payment terms, for example you can often extend the term of the lease so that you can lower your monthly payments. This can be advantageous, especially if you have less than perfect credit, if you have a newer business or you are trying to minimize your monthly costs.
Cons of Leasing Equipment
- Greater Long-Term Costs – You may have to spend more money in the long term when leasing compared to purchasing equipment upfront, depending on the structure of the lease.
- Obligation to Pay the Entire Lease – Most lease structures will require you to pay for the entire obligation of the lease. Some may allow for early termination fees if your business needs change or you find that you don’t need the equipment any longer.
- Lack of Ownership – This depends on your lease structure, but at the end of the lease you may have no rights of ownership of the equipment, such as with an operating lease. This may not matter if you would prefer to avoid the hassles of ownership such as costs associated with maintenance, selling the equipment when it’s no longer needed, etc.
Alliance Funding Group can help you determine the Pros and Cons of Equipment Leasing whether leasing and whether it is right for your business. Reach us today at 1-800-978-8817 for more information.