No matter how small or big the business industry you choose to operate, you will be needing equipment to keep it running. From tables, chairs, racks to even heavy machinery like forklifts and conveyors, it is possible to rent almost anything that your company needs.
Depending on the type of industry you have, leasing equipment may be one of your largest expenses. Though it is an attractive option because of lesser one-time expenses, the reality is, it isn’t for everyone. Hence, it takes one to understand the advantage and disadvantages of equipment leasing.
- They can be easily upgraded.
Leasing gives you the freedom to upgrade to a better model once your agreement expires. Carefully structure your lease contract and plot on the timeframe you expect to have an upgrade. For example, you plan to have better equipment in a span of three years, so your contract should be for a three-year term. In doing this, you can easily trade in the model and upgrade to a better one.
- Initial cost for equipment purchases is lesser.
Instead of buying and obtaining the equipment, leasing it allows you to make monthly payments to the reputable leasing companies like Strongbox to use the equipment. This is an attractive benefit for business owners because the lease allows them to spread out the cost of their purchase. The total purchase price will be less than the price that you’re supposed to pay in buying the equipment. Also, monthly payments are paid gradually making it less overwhelming.
- You pay interest
Interest rates for equipment leasing vary depending on the type of machinery, but generally, payment on an average is around 5% APR. Though leasing equipment is different from equipment loan, business owners are still obliged to pay interest. So make sure to check your current financial situation, because this will help make the crucial decisions as to whether buying the equipment outright or just leasing it. It is less expensive to pay interest when you purchase outright.
- Limited access for new businesses
Operating a relatively new business can be challenging, businesses as new as two years old may run into some difficulty having this kind of lease agreement. This is even true despite having a solid credit and a worthy track record. Being a new business owner, it might be best to consider other options other than leasing, this is because a larger amount of payment may be required up front to get the deal.
The most important thing to consider is knowing your current financial status. Make sure to make a decision based on your financial state and evaluate the pros and cons provided in this article. Visit Strongbox for more information about leasing.