It is a common misconception that it's always better to own equipment rather than rent it. This is true if you will use the equipment often, if the equipment will more than pay for itself in utility, and if the equipment costs very little to maintain.
But in business, matters of financial efficiency aren't always so clear-cut. There are many instances where a temporary measure is more efficient - and flexible - than a permanent one. Equipment leasing is one of those instances.
Many businesses lease equipment during their startup phase, during expansions, and during special projects. Some teams lease a variety of equipment regularly, with a spreadsheet to prove why periodic rental is more economical than buying the equipment outright. How, exactly, does equipment leasing benefit businesses? Let's take a closer look.
1. Controlling Your Cash Flow
Business equipment can be extremely expensive, and running a business relies on the practical use of revenue and cash flow. Creating a large amount of debt from a recent financed purchase of equipment could throw your cash flow off-balance, where a regular rental payment is an easily calculated expense. Leasing allows you to make financial decisions one lease period at a time without any major financial changes to your balance sheet.
2. Big Projects Without a Big Investment
What about the equipment you only need for a large project? Construction and landscaping teams often will rent large equipment that is only needed for special projects. Cranes and lifts, large earth-moving vehicles, and portable generators are all more commonly leased than purchased by the teams that use them the most often. This allows a business to keep overhead light while also committing to large projects that require specialty or oversized equipment.
3. When You Need Gear to Make Money to Buy Gear
Startups and expanding businesses lease equipment to grow, generate more revenue and then buy the equipment they've been using. This is why many equipment leasing teams offer lease-to-own or an option to buy a new model at the end of the lease term. Leasing keeps expenses low while businesses use that very leased equipment to generate the revenue to buy the equipment outright.
4. Minimizing Debt Burden
Buying a piece of large equipment can create debt for the business, which reduces your overall financing options. Leasing does not create debt, keeping your financial options fully accessible at a lower debt-to-income ratio. When managing your debt levels is strategically important, leasing becomes a far more considerable option.
5. Eliminating Storage and Maintenance Costs
Maintaining large equipment is not always affordable. Consider the work that goes into keeping a backhoe or a portable generator in top condition, ready to perform at any moment. They need to be constantly cleaned, fueled, and run occasionally. The warehouse space alone comes with its own cost for large equipment or large quantities of personal equipment. When you lease equipment, maintenance and storage between uses is up to the equipment company.
6. Always Use the Latest Model in the Best Condition
You also never have to use old equipment when leasing. Your business can always use the latest models, kept in the best condition by expert equipment rental teams. Every year, the leasing company will get new models, then sell the old models, and your clients gain the benefit. No need to maintain aging models, and you always arrive with cutting-edge gear.
7. No Hassle to Sell and Replace
When you're ready to use new equipment, trading out is simple with your leasing company. No need to clean, photograph, list, sell, ship, or then buy replacements for equipment in your business inventory. Instead, you pick up equipment when you need it, and lease different equipment as your needs change.
8. Tax Benefits of Leasing
Finally, equipment leasing is often fully covered as a tax-deductible business expense. This can help manage the business' taxes and yearly expenses.
Are you considering equipment leasing as a strategy for your business? Wilmare Inc can help. Contact us today to explore equipment leasing strategies and how the right equipment lease can improve your business operations and finances together.