Equipment leasing is a sort of financing in which you rent rather than buy the equipment entirely. You can lease expensive company equipment, such as machinery, trucks, and computers. The equipment is leased for a specified amount of time; once the contract expires, you can return it, renew the lease, or purchase it.
When the leasing term ends, you do not own the equipment. When leasing equipment, you pay interest and fees, which are typically added to the monthly payment, just as with a business loan. There may be additional expenses for insurance, maintenance, and repairs. Equipment leasing can be far more costly in the long run than owning the equipment outright.
How does equipment leasing works?
If you want to lease equipment for your business rather than purchase it outright, you will enter into a lease agreement with the equipment owner or seller. Similar to how a rental lease agreement works, the equipment owner creates an agreement outlining how long you’ll lease the equipment and how much you’ll pay each month.
During the lease term, you can use the equipment till it expires. There are some circumstances, in which you can break the lease, and they should be included in the contract, but many leases cannot be cancelled. Once the lease expires, you can typically purchase the equipment at the current market rate or cheaper, depending on the seller.
Equipment leasing agreements are typically three, seven, or ten years long, depending on the type of equipment. Since it is not a loan, it will not appear on your credit report or affect your ability to borrow.
Benefits Of Equipment Leasing
Leasing equipment provides numerous benefits to cash-strapped small enterprises. While not all equipment leases are the same, and there are numerous ways to finance a lease, here are some benefits of leasing your equipment:
- The initial investment is little. Many lessors do not require a large down payment.
- You can upgrade your equipment. If you frequently need to update equipment, leasing is a smart alternative because you are not trapped with outdated machinery.
- It is easier to scale. If you need to update to more advanced equipment to accommodate a bigger work volume, you don’t have to sell your current machinery and go searching for replacements.
- It may offer tax breaks. Equipment leases are frequently eligible for tax credits. Depending on the lease, you may be eligible to deduct the payments as a business expense.
So, this was a brief overview of equipment leasing, how it works and its benefits for small business owners. If you are planning to get an equipment on lease from the best equipment leasing companies in Abbotsford, Sandhu & Sran Leasing & Financing has got you covered. Over the years, we have assisted hundreds of clients with equipment financing, commercial leasing, truck loans, and machinery loan services. For more details, give us a call.
