Advantages & Disadvantages of Equipment Leasing

Businesses Need Equipment

Many businesses like to lease equipment because it makes financial sense, while other businesses prefer to buy equipment for that very same reason. Here is a look at potential advantages and disadvantages of equipment leasing.

Advantages of Leasing

  • Leasing is potentially cheaper than buying equipment, especially if maintenance is included in a lease.
  • Leasing ensures that your company stays on top of technology; include upgrades in the leasing agreement.
  • Your lease payments are tax deductible when you use the equipment in your business.
  • You can usually qualify to lease equipment with lower credit standards than if you purchase the equipment with a loan.
  • Some companies let you do a purchase option, in which part of your payments go toward purchasing the equipment at the end of the lease term.

Disadvantages of Leasing

  • The long-term costs of financing and owning equipment are typically lower than the overall costs of leasing.
  • The leasing company could hold you responsible for equipment damage costs at the end of the lease term.
  • You get depreciation deductions over time with equipment ownership, with leasing you only deduct lease payments.
  • Purchasing the equipment at the end of a lease term can be cost prohibitive, especially if fees and intricate legalese are involved.

Leasing Companies Are Not Alike

To minimize the possible disadvantages, contract with an equipment leasing company you have thoroughly researched and trust. Have an attorney review leasing agreements before you sign them, and ensure you understand what you will be responsible for during and after the lease is over.