We know buying equipment has its benefits and acquiring equipment on lease has its benefits as well! So, which option is better? Either to buy equipment or take on the lease? Lots of businesses do not even know that they can get equipment on the lease! Furthermore, equipment leasing can be beneficial for business. In this blog, you will explore why getting equipment on lease is more beneficial for business rather than buying it!
As per Statista, “In 2019, the commercial or industrial equipment rental and leasing revenue in the United States amounted to 84.08 billion U.S. dollars.”
What Are the Benefits of Leasing Equipment for Organizations?
Equipment leasing benefits for organizations are discussed below:
1. Minimum Maintenance
When the total cost of ownership increases every year via maintenance or other expenses then it is better to get assets on lease. Repair and maintenance are one of the primary concerns for assets and equipment. As their life is also decreasing every year. We know maintenance is costly it will impact your profit margins that is why it can be a better option for leasing equipment and all you need to do minimum maintenance.
2. Tax Benefits
If you are getting equipment on lease & you are making lease payments then you can get tax benefits. You can show the payment receipt of lease equipment to your finance team so that they can avail rebate on tax. For tax objectives, most types of equipment and asset lease may be classified as a form of company expense. These sums can be deducted at the end of the financial year to lower the organization's tax liabilities.
3. Get Updated Equipment
When you have purchased equipment, you cannot return assets or sell assets easily. But in the case of leasing equipment, you can return assets to get updated equipment. However, you need to makes that it is mentioned in the agreement. This way you can use the latest technology without paying much. Furthermore, you can easily avoid the risk of obsolescence.
In Which Cases Equipment Leasing Can Be Beneficial for Business?
Below we have discussed few cases for which equipment leasing can be beneficial for business:
#Case 1 - When you have some specific needs, for instance, you got a client which have some particular requirements if you want to fill that requirement you need to purchase an asset but it is very expensive to buy equipment in that case you can get asset on the lease after completing the job you can return the asset to its owner.
#Case 2 - In the long run leasing assets and equipment can be costlier than purchasing! For instance, you brought a computer worth $5000 at a standard rate of $150 per month. It for you getting it on lease for one year then again for the next and another year (3 years in total). If you calculate then it will cost you $5400. Therefore, it is better to plan for the future and anticipate the situation.
According to Statista, “It is projected that the revenue of rental and leasing of other machinery, equipment, and tangible goods in the United Kingdom will amount to approximately 25.122,4 million U.S. Dollars by 2024.” The data show lots of businesses are dependent on leasing equipment.
#Case 3 - If you buy equipment that needs maintenance and repairing or update regularly will not be beneficial for your business. On the other hand, leasing equipment enables you to return old equipment. It eliminates the cost of maintenance, repair, updates, and so on. You can get a piece of new equipment on a lease that does not need an update.
#Case 4 - When you do not want to invest your money on purchasing equipment and are only focused on growing business then also you can emphasize leasing equipment.
If you can predict your monthly expenses and have confidence that you have predicted correctly then you plan for future monthly expenses.
How Asset Management Software Can Help in Leasing Equipment?
Asset management software can help in the effective handling of equipment especially when equipment is on the lease because you must take care of assets. For the lessee it is crucial to maintain assets otherwise the company will have to pay a fine.
You must maintain assets records properly so that you know in advance when an asset needs to be returned & finish all work before returning equipment.
Asset management software helps lessee organizations to take care of assets by providing the necessary maintenance. It provides all the information of each asset and alerts the manager when an asset needs to be returned.
Other than this asset management software provides reports that can help increase the performance of each asset. It can help in understanding where equipment performance can be optimized.
Equipment leasing can be beneficial for business especially those organization who does not have enough money to purchase equipment. However, you need to ensure that equipment will only for a specific period not longer than that. Otherwise, it can prove to be costlier than purchasing equipment.
Frequently Asked Questions (FAQs)
1. What is equipment leasing?
Several organizations provide equipment on lease. (that is lessor company) Then some organizations take equipment on the lease (lessee company). A lessee company does not have much money to buy equipment so they take equipment on a lease that is known as equipment leasing.
2. Explain how equipment buying can be beneficial in a real scenario?
The best example is cab rental! Suppose 4 people want to travel but you do not have a car. So, they will not buy a car, they will simply book a cab. It will not only be cost-effective but maintenance and insurance expenses will be saved also. Similarly, when you have limited resources & the need is limited then you can lease equipment & after using return it.
3. What are the advantages of leasing equipment?
1. You do not have to give full money upfront as it is available on monthly expenses.
2. Access to higher quality &updated assets.
3. Less repair and maintenance charges.
4. Rental assets help minimize taxable income.