Business is a tough, tough world. You have got to be switched on and ready to push at all times if you want to make it. Sometimes that means leveraging your assets, or expanding aggressively. These kinds of moves take money, and resources are usually very limited. One way for many businesses to free up some funds is to lease their equipment instead of paying a big chunk of cash to buy it all.
Thing is, leasing isn’t a yellow brick road to extra money. It can have downsides too, so we’re going to show you 4 pros and cons of going the leasing route. If you’re interested in learning more you could head over to the AvTech website and read more now, though we’ve started off with a great primer for you right here below.
- Advantage – Lower Cost
The main advantage to leasing equipment comes in the lower cost up front. Because you aren’t buying the equipment, you only pay a portion of the cost to lease it, yet you still get full use of it. This lower cost translates as more cash flow available for other areas of your business, like HR or marketing. This is great if you can make good use of the cash and boost your income with it, making you more profitable. More profit means you can follow more aggressive strategies and push for a dominant market position.
- Disadvantage – No Ownership
This is the obvious disadvantage – you don’t own your equipment so it doesn’t add any value to your business as an asset. This can be good if it comes to equipment repair or maintenance though. Looking at it from a business perspective, when the lease runs out you have to give the equipment back and are left with nothing for what you spent. Make sure the lease is worth it to you by ensuring it brings enough profit over the lease period to offset this cost.
- Advantage – Tech Advances Have Less Effect
Just like the equipment owners are responsible for maintenance, they also need to provide the latest and best equipment to stay competitive. This is great for tech-related equipment because it develops and advances so fast. By leasing this equipment, you don’t pay full cost and once the contract expires, you can lease the newer, better equipment still without paying the full cost.
- Disadvantage – Long Term Expense
Over the long-term, the cost of repeatedly leasing equipment will begin to add up. Even over a few years, it can start to match or exceed the cost of having bought the equipment in the first place. If this is equipment which isn’t likely to need upgrading for many years, that’s a real disadvantage. You’re left having paid more than the equipment cost and don’t own anything to show for it, so there’s no way to recoup any cash or sell anything on. Make sure the deal is worth it by trying to buy equipment which would be worth holding on to for years or won’t need upgrading and leasing the stuff which is more likely to need upgrading or changing in the near future.