Equipment Financing or Leasing – Which Should You Choose?
For those of you that might be about to submit an application to a lender in an effort to obtain equipment financing – you might want to take a step back and reconsider your options. Sure, finance can be a great way to get what you want immediately and then pay back what you owe over time, but is that really the only option out there?
For example; have you heard about equipment leasing? Where financing will allow you to apply for a sum of cash to cover the value of a particular asset (such as a new vehicle, office equipment, or tech-based products), leasing will allow you to be able to do the same; albeit without the need to pay off a loan.
What does that mean exactly?
Well, for all intents and purposes, leasing could be considered a form of rental arrangement between you and a supplier. Say for example that you wanted to buy a new company van at a cost of $12,000, you might want to borrow cash and have a lender cover the costs for you, while you work on paying back what you owe over say, seven years.
You’ll be paying back consistently if you want to avoid your van being repossessed, but one thing that plenty of business owners overlook is how their new asset might look by the time their payments come to an end. There’s no telling how many chips, dings and bumps your new van could have by then – and the worst thing is that you’ll still be expected to pay back what you borrowed.
What about depreciation?
Most lenders understand these events and this is why plenty will take depreciation into account. You could also invest in insurance to cover the cost of damage, whilst ensuring that your van stays in tip-top condition well into the future. But that won’t always help you to feel okay about the fact that you will actually be paying for a van that might end up being under-valued in the future, or even obsolete when compared to newer models.
Where does leasing come into things?
On the other hand, you could always opt to lease your assets from a supplier instead. You won’t ever own them – but you will be able to enjoy a fairly flexible contract that should allow you to use them as if you owned them, whilst only paying for the van for as long as you need it. The same could be applied to any product for that matter, such as tractors, industrial tools, or even office furniture.
If you want to buy as a long term investment, then financing may be the best option. If you don’t mind hiring for as long as you need – then leasing could be the more preferred alternative.
Tundra - Experts in Business Finance
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Tundra Business Synergy
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