Most businesses need some sort of equipment to operate. Unfortunately, in many instances, these machines can be expensive to purchase. Equipment leasing can save you money whether you need new stoves and ovens for your restaurants or trucks and commercial lawnmowers for a landscaping company. It is best to choose an operating lease with a short-term of two years or less, so the rental company maintains ownership of the equipment. Avoid a capital lease, which acts more like a loan and eventually leads to ownership of the equipment in about five years. Although a capital lease gives you the equipment you need, it negates many of the financial benefits of renting.
What Are The Benefits of Equipment Leasing?
Here are four ways renting these essential machines saves you money.
1. Lower Initial Cost
If you purchased the equipment you need to run your business, you would have a considerable expense. This is especially true if you are just starting out or you have several machines to replace at one time. Leasing provides you with the new tools you need now with only the monthly rental payment to cover.
2. Manageable Expense
Your monthly rental payments make the cost more manageable. If any of the machines need repairs in the future, the company you lease from is responsible for the bills, not you. Having a predictable expense helps you plan the best way to use your available funds to increase your profits.
3. Easier to Replace
Technology is constantly evolving to produce new and better products. The equipment you use now could be obsolete in a year or two. Leasing allows you the flexibility to upgrade to the latest and greatest machines in the future to keep your company running efficiently. Trying to replace purchased equipment with newer innovative ones will cause a hit to your cash flow and possibly leave you with outdated machinery no one else wants to buy.
4. Deductible on Your Taxes
The United States tax laws allow business owners to deduct the cost of depreciable equipment. That means you can reduce your tax bill by deducting the cost of your lease payments. Paying lower taxes allows you to spend the extra money on other areas of your business.
Equipment leasing has many benefits for small business owners. This option helps to improve your cash flow and allows you the flexibility to allocate the saved funds to other expenses.