GREAT ARTICLE BY Sun South Equipment Leasing, Inc
LEASING vs PURCHASING
Sun South Equipment Leasing, Inc
Why Lease Versus Buy
There are a multitude of reasons why leasing your business equipment versus buying outright with cash is the best choice for your business. Small businesses especially are better able to manage the cost of expensive equipment that is essential to operate daily and be successful when offered a monthly payment plan rather than coming out of pocket for the full amount all at once. When you lease verses buy with cash, you improve cash flow leaving your business better equipped to handle the debilitating effects of a sluggish economy and other unpredictable events that prevent your business from rising to the top of your industry.
Advantage of Lease Versus Buy
One of the biggest advantages of leasing equipment is the ability to conserve cash, and leave bank lines of credit untouched which should be used for the daily operations of business. Cash, plain and simple, once it’s gone, it’s gone, you can’t get it back, so it just doesn’t make good sense to deplete cash reserves unnecessarily without first looking at the alternative purchase option leasing offers your business. Leasing is 100 % financed with low monthly payments over a long term. Generally 24, 36, 48 and 60 month terms are available with lower up front cost than with traditional financing methods, allowing your business to choose from new top of the line equipment and even used equipment can be leased.
Capital Lease or Operating Lease
Depending on your cash flow needs and the type of revenue producing equipment needed for your operational structure, you will need to decide whether to finance the equipment in the form of a capital lease, or have use of the equipment through an operating lease. It is important to appraise these two types of lease financing with each type having a number of differences to consider before deciding which type of lease option is a better fit for your business.
The operating lease is useful when the business or company requires rent equipment for a given period of time after which the equipment gets returned to the leasing company. Such an option has its own advantages and disadvantages, and the main drawback would affect your business in case the equipment is not likely to get too old within its industry. On the other hand, if the industry in which it is used in which aged equipment does not make a big and negative impact, this option is well worth considering.
The capital lease option is one in which your company or business will be accounting for equipment that is being leased as if it were purchased outright. When the term of the lease expires, your company would most likely have a nominal buy-out option giving ownership of the equipment to your business.