Thinking about adding some new equipment to your business this year? Whether you are starting a new business or already own one, you’ll probably be asking yourself some questions regarding your lease duration, payments, and leasing structure for the new or used equipment.
Here are a few factors to consider when adding new equipment, both in terms of financing and leasing:
- How often do you use the equipment?
- What you want your fleet to look like?
- What warranty new equipment comes with?
- Cost differences between new and used equipment?
- Cost differences between financing and leasing?
- How much time can I own a leased equipment?
- What is the time period for financing equipment?
- What are the down payment requirements?
If someone tells you what lease term and structure you should take without asking a few simple questions, they aren’t guiding you and working hard enough to find you the right lease or structure for your specific business.
When discussing new equipment with clients, leasing and financing consultants in Abbotsford like to ask the following questions to see if they can help with the financial side of their client’s business by asking few simple questions like:
- When do you plan on replacing the asset?
- Can you restructure your fleet to reflect the replacement?
- Will this keep the cash flow firm and prevent depreciation over the next 36 months?
- Have you discussed with your accountant the benefits of leasing versus purchasing?
- What will be your equipment’s “fair market value” at the end of the term?
This is something that most small businesses don’t do, but should. Inquire with your accountant about the impact of the lease expense and what it means for your firm. They are the experts on your balance sheet/finances and can assist you with this.
If you have 35% or more of the capital cost of your equipment remaining at the conclusion of the term when it’s time to resell, you haven’t arranged your lease appropriately. Taking a longer term and deducting the lease expense would be more beneficial; most accountants would tell you that they can write off the entire amount. Another excellent approach is to include a residual or balloon payment at the end.
When adding new equipment to your fleet, you should consider all the above discussed factors. What if your company could use the extra cash flow to acquire modern equipment your competitor doesn’t have? What if you could reduce your tax burden by deducting a lease expense? Perhaps you might add more equipment and expand your business?
Our equipment financing consultant at Sandhu & Sran Leasing & Financing can help you make the right choice by understanding your needs, your financial status, your long-term business goals, and more. For reliable equipment financing in Abbotsford, rely on no other than our experts. We specialize in commercial leasing, heavy equipment financing, truck loans, construction machinery, and farm equipment financing. For more details on financing and leasing, give us a call today.
