Business equipment leasing is a useful option for companies at any stage of the game – from small startups to larger corporations – who lack the extra capital to purchase it or that simply don’t want the long-term commitment of ownership. A good example would be a business owner whose equipment needs to be upgraded every few years, according to an article on Forbes.com.
If you’re planning on leasing your office equipment, you won’t be alone – it’s estimated that up to 80 percent of businesses lease their business equipment, according to VendorSeek.com
According to Entrepreneur.com, obtaining a lease for under $100,000 is usually no more complicated than filling out a credit application. For higher amounts, the company needs to go through a more thorough credit check and it must supply more information about its finances.
Leasing has little to no upfront costs, which means you can save much-needed cash at the outset. Plus, leased equipment can be used as a tax deduction and usually has more flexible terms than a standard business loan. Just make sure to get quotes from multiple leasing companies to ensure you’re getting the fairest deal available.
Of course, on the flipside, you will always pay more over the long run for leased equipment then if you buy it outright. Even if you stop using the equipment, you’ll still be required to make payments on it per the stipulation of the lease, despite the fact that you won’t necessarily own any of the equipment at the end of the lease. (At the end of the lease business can return the equipment, begin another lease, purchase the equipment for a price agreed upon at the start of the lease, or purchase the equipment for its fair market value.)
There is a variety of office equipment that can be leased and different variables to consider before leasing it, including:
1. Furniture - Consider the type of work your employees do, how often your business will host clients, the size of your office and the furniture you already have before deciding what kinds of office furniture you need to lease. Dealers suggest bringing a simple plan or diagram of the space along with examples of the existing decor to find the best matches for your needs. If possible, look for furniture dealers locally so that you can inspect the furniture in person before committing to it. Be sure to read over all the terms thoroughly – especially those involving furniture damage and return. Inspect all furniture carefully for existing damage and ensure you won’t be charged for it when returning the furniture.
2. Computers - Computers can become obsolete quickly – so leasing can be a responsible choice for business owners. Typically. computer leases are for three years, which fits into the life-cycle of this technology, according to an article on technology.inc.com. Look for experienced suppliers who have a full range of products for you to choose from and are known to be reliable. Find out if you can finance your equipment on an operating lease basis, which will give you a tax incentive because you aren’t assuming the liability of the equipment. Before signing a lease agreement, find out if you’ll be able to terminate the lease early or if there are penalties for prepayment in the event that you need to upgrade sooner than the life of the lease.
3. Telecommunications – The cost of purchasing telephone service for a company can be overwhelming – startup equipment includes phones, routers, switchboards and more. You’ll want to get quotes from multiple telephone leasing companies to ensure you’re getting the best deal. Need advice on where to start your search? Try Direct Capital, Infinit Technology Services or TMN Financial Services. Find out what fees you might be assessed if you need to upgrade your equipment before the end of the lease. For example, some companies will charge you for disabling your old system and installing the new one.
4. Electronics (copiers, faxes, scanners, printers, etc.) – Some companies charge on a per-copy basis and might require a monthly copying minimum, according to buyerzone.com, so make sure to do an accurate assessment of your copying needs before leasing. If you estimate you’ll make fewer than 700 copies per month, consider buying a small copy machine from an office supply store. Read the service agreement carefully to understand which parts and labor will be covered by the leaser and what you are responsible for repairing or replacing. Also, make sure to read the terms for emergency repairs. If possible, request an in-house demonstration of the equipment before committing to a particular machine, or visit the dealer to learn how they work.
5. Vehicles - Getting a commercial vehicle lease has significant tax incentives for businesses – everything including up-front costs, monthly payments, insurance, maintenance and repairs can be deducted. Before heading to a dealer, make sure you understand what type of lease will be better for your company – a closed-end lease or an open-end lease. Typically closed-end leases are used for individuals more than businesses. With this type of lease, the leasing company assumes the risk if the residual price is less than originally estimated, and the consumer is free to walk away from the vehicle with no strings attached. For open-end leases, the lessee assumes the financial risk and is responsible for paying the difference between the estimated lease value and the actual market value at the end of the lease. Have the dealer show you deals that focus on the residual value and money factor from several banks to ensure you’re getting the best terms, according to Kiplinger.com. Make sure the maximum mileage allotted per year (typically 10,000 – 12,000 miles for closed-end leases and more than 12,000 for open-end leases) is enough; if it isn’t, find out if you can negotiate a higher limit in exchange for a higher monthly payment.