One solution used by many businesses is to lease the equipment. By choosing to lease, businesses can spread out the cost of the equipment over several years through manageable monthly payments. Leasing can also provide the flexibility to upgrade or replace obsolete equipment.
However, leasing comes with its drawbacks, including the interest expense, finding the right lease, and navigating the paperwork. Here are five considerations to keep in mind if you’re thinking of leasing business equipment.
Identify your equipment needs
Before starting any type of lease agreement, it's critical to identify exactly what equipment your business needs. Understand the latest models, read reviews, and consider warranty, repair, and delivery options. Also, anticipate when and how you will need to replace or upgrade the equipment. Knowledge is power when negotiating lease agreements, so research comparative prices to ensure you're getting a fair deal.
Set an equipment budget
Determine what your business can afford to spend on equipment each month. Recognising your financial constraints upfront can guide your leasing decisions and prevent you from over-committing yourself financially.
Understand the lease process
Leasing business equipment involves providing comprehensive financial information about your business. Prepare all relevant documentation in advance to help facilitate a smooth application process.
Know your entitlements
Familiarise yourself with the details of lease agreements, such as comparative interest rates and application fees. Understand what support the lessor provides and enquire about payment flexibility options if your business's cash flow is variable. Some leasing companies offer buyout options at the end of the lease period, allowing you to purchase the equipment at a reduced price. Balance this against the cost of replacing old equipment and your company's specific needs.
Assess the credibility of the lessor
Terms and conditions can vary significantly between leasing companies. Take the time to understand the credibility and reliability of potential lessors. Read customer reviews, verify their accreditations, and investigate the level of support they offer. Equipment malfunctions can disrupt business operations, so it's important to understand the lessor's warranty policies and the technical support available to you.