What is one benefit of leasing capital equipment versus buying?
To help business owners decide if they should lease or buy capital equipment, we asked CEOs and business professionals this question for their best insights. From having more ability for one-off projects to increased flexibility in your budget, there are several ways that may help you decide on leasing when it comes to capital equipment for your business’s continued success.
Here are seven benefits of leasing vs buying capital equipment:
- No Need to Obtain a Loan
- Fewer Costs for Maintenance
- Increase Flexibility for Budgets
- Ability for One-Off Projects
- Obtain More Up-to-Date Equipment
- Getting an Income Tax Break
- Increase Quality of Product or Service
No Need to Obtain a Loan
Leasing equipment can be considered a “non-cash” expense. This means that the company does not have to come up with the cash upfront to purchase this equipment. Instead, they will pay the leasing company over time and not have to worry about obtaining financing. If your business is a startup, you may not have any credit history established yet and if you are just starting out, it can be difficult to obtain financing from a bank. However, you should still consider leasing equipment in this situation because by leasing instead of purchasing, you do not need to worry about paying it off if something goes wrong with your business. For example, if your business fails, the lease payments will stop even though there is still a balance left on the lease agreement that you would have had to pay back if you bought the equipment instead of leasing it.
Adam Garcia, The Stock Dork
Fewer Costs for Maintenance
One of the lesser-known benefits of leasing is the transfer of the cost of equipment maintenance to the leasing company. This is often an underappreciated benefit that can save you a lot of headaches down the road. Dealing with the extra costs stemming from repairs is thus effectively outsourced helping you cross out this item from the to worry list.
Magda Zurawska, ResumeLab
Increase Flexibility for Budgets
One benefit of leasing capital equipment instead of buying is that you avoid the large upfront capital investment. Instead you are able to shift this capital expense to an operating expense which is very advantageous for accounting purposes.
Chris Gadek, AdQuick
Ability for One-Off Projects
Leasing equipment can be really beneficial if you are planning on using the equipment for an off job or a one time event. Instead of buying a piece of equipment and spending all that money for one time, you can lease the equipment instead and save a lot of money.
Lauren Picasso, Cure Hydration
Obtain More Up-to-Date Equipment
Leasing equipment instead of buying the equipment outright can be very helpful in preventing you from having outdated equipment. With leasing, you can always have the most up-to-date equipment in your warehouse. This helps your production team stay more efficient and reduces labor costs in the long run.
Craig Carter, Jack Mason
Getting an Income Tax Break
Leasing capital equipment provides an income tax break because you can deduct it as a business expense. This will allow you to have more money in the business for other necessary expenses that pop up.
Greg Hannely, Soba Recovery
Increase Quality of Product or Service
In the long-term, typically, once popular equipment becomes obsolete after a few years and is no longer fully supported by the manufacturer. This is when it becomes a legacy asset. Leasing allows you to return or replace these legacy assets with more up-to-date equipment while avoiding the need to invest more. This means you can go easy on your cash reserves and maintain your cash flow as before, but with higher or better production throughput.
Hays Bailey, SHEQSY