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Read out buying advice for equipment leasing
Starting a business requires certain equipment and hardware. But purchasing all the necessary equipment often is not possible, especially for small companies and new startups. Well, if your company is not able to fund the purchase of equipment, there are still other ways to enjoy the economic benefits of that equipment.
How? The answer is quite simple and that is either renting or leasing the equipment. However, equipment leasing is more feasible for small ventures and freshers. Not sure what equipment leasing means or how it works? And what makes this acquisition option better than purchasing or renting the equipment? Then let us walk you through everything you need to know about equipment leasing!
Equipment Leasing – An Overview:
Equipment Lease or leasing is a type of renting, except where the rules are a bit different. The company or business acquires the equipment for a certain period, often between 3 to 5 years. However, the lease term must not exceed more than the equipment’s useful life. The ownership of the equipment remains with the lessor (the lending party) while the economic benefits of that equipment are transferred to the lessee (the borrowing party).
And instead of paying the whole price for the equipment, the lessee pays the market price plus the interest in installments. These installments could be annual, bi-annual, and quarterly. You could lease a brand new, as well as reconditioned or used equipment on the lease as well.
How Is Leasing Different Traditional Renting?
Although leasing also involves rentals, it is different than renting equipment. Well, one of the major differences between leasing and renting is that the lessor ( borrower) doesn’t have to pay monthly rent. Plus, when a company rents equipment, the dealer doesn’t charge interest on the rent.
On the other hand, lease rentals are inclusive of the mark-up (intertest) either in advance or arrears. But the most prominent difference between the two acquisition modes is that in equipment leasing – lessee has the option to purchase the ownership of the equipment at the end of the lease term.
Types of Lease:
Equipment Leasing is classified into two major categories – the operating lease and the finance/capital lease. When acquiring equipment on lease, it is quite important to know the types of lease, to make a well-informed decision. Here is what you need to know about the leasing types:
– Operating Lease:
A lease concedes the entrepreneur’s impermanent utilization of the hardware, with no transfer of ownership at the end of the lease term. Operating lease is typically a tenant agreement where your business doesn’t get the advantages of legal ownership. it is ordinarily utilized when financing equipment with a short useful life, or equipment that you intend to supplant as often as possible or at the end of the lease term.
– Capital Lease:
A lease that comes with a bargain to purchase option, where the borrower has the right to transfer the ownership of the leased asset in its name at the end of the lease. Ordinarily, it is an agreement where your business gets all the risks and benefits of owning the gear. Capital or finance lease is more typical than a working lease and is most appropriate for getting costly bits of hardware that you plan to keep as a long haul resource.
Benefits Of Leasing An Equipment:
If you are confused about whether you should lease, purchase or rent equipment, then consider the benefits over costs of all the three acquisition modes. However, a simple analysis of leasing shows that it provides stability, flexibility and preserves your business capital for good.
Here is a detailed list of all the benefits of acquiring equipment on lease rather than purchasing it!
– Minimal Initial or Incidental Expenses:
One of the basic benefits of equipment leasing is that it enables you to obtain resources at insignificant initial costs. Since leasing requires an upfront installment, you can acquire the equipment you need without fundamentally influencing your income. It means that leasing is most beneficial for start-ups, small companies or the one going in financial crisis.
– Allowable Tax Expense:
The biggest relief of acquiring equipment on lease is tax relief. Unlike the purchase of the equipment, the lease rentals or payments are tax-deductible. It reduces the tax liability and hence the business can save that expense.
– Flexible and Convenient Terms:
Regardless of the leasing type, it is typically simpler to acquire and have more adaptable terms than credits for purchasing the equipment. This can be noteworthily favorable in the event that you have terrible credit or need to arrange a more extended installment – intend to bring down your expenses.
– Frequent Equipment Upgradation:
Lease enables organizations to address the issue of out of date quality. In the event that you utilize your rent to get things that might be obsolete in a brief timeframe, for example, PCs or other cutting edge gear, rent passes the weight of outdated nature onto the lessor. You are allowed to lease another, better quality equipment after your lease lapses.
Equipment Leasing For Your Business:
Whether you are thinking to start your new venture or your company needs new and better equipment, you can easily finance it through equipment leasing. And you don’t have to wander here and there in search of the best dealers or lease providers these days. When you look for the best leasing service providers, there comes a long list of dealers and suppliers for lease.
To get a quote from the best lease dealers, you have to answer certain questions, such as:
- The type of equipment financing – Grants for equipment purchase, leasing or other loans.
- The number of equipment you want to finance,
- An estimate of the amount your business needs to finance the equipment,
- Duration of your business operation from commencement to date,
- Gross revenues for the last twelve months.
- does your business has a credit issue?
Equipment Lease – Cost and Total Expenses:
Though equipment leasing is a feasible option for small or mint ventures, the overall cost is usually higher than the market price. It is because of the markup charged on every installment. The lease cost or lease payment mainly has two components, the lease rental and the finance charge/interest rate on lease.
The slab rate for interest on equipment leasing is between 6% to 30%. While the average interest on lease terms is charged at an interest rate, ranging from 6% to 16%. In addition to the interest rate fluctuation the cost of the lease financing also varies on the basis of the following factors:
- The credit score of the business,
- Total time in the business,
- Value of the equipment,
- Total lease terms or period; and
- Lease type and size.
Get A Reasonable Leasing Quote With Us!
Leasing and equipment for your business is not a problem. The real problem is finding the right dealer. No doubt there are a number of leasing companies and dealers who rent equipment on lease, but not all of them offer you most competitive and fair interest rate. Plus often times the lease terms are not flexible either. So if you are looking for an instant solution for all your problems regarding equipment leasing, fill out our quote form and we will help you with the process!