The Perks of Equipment Leasing
Many small business owners struggle with the decision of whether to purchase or lease their equipment. In some cases, the decision is made for them, as they do not have the cash on hand to buy the machinery outright. Even if you do have enough money to pay for everything in cash, there are some advantages to equipment leasing. Here are three of them.
- Tax Deduction
When you purchase something, you might not be able to deduct the entire price of the equipment immediately. The IRS requires that you depreciate the value of the equipment over time, which means you spread your deduction over time. When you lease your equipment, you can deduct the amount of your annual lease payments up to a designated maximum each year. You get to subtract what it’s costing you to lease your machines from your annual taxable income.
- Complete Financing
Equipment leasing also allows you to finance the entire cost, not just the purchase price. Most lessors offer installation and maintenance of the equipment once you’ve signed on the bottom line, whereas when you buy the machines, you have to install and maintain them yourself. The installation and servicing is included in your lease payments, meaning the total costs of using the equipment are financed and, as such, tax deductible as discussed above.
- Constant Upgrades
If you are leasing computers, copiers, printers, fax machines and other office equipment, you know that the technology behind these machines changes annually. Even smartphones are upgraded to newer versions each year. Once you’ve completed the terms of your original contract, you can opt for equipment upgrades before signing a new lease. You can have your equipment upgraded annually or every two years or longer, depending on what you prefer.
This is important because streamlining the operations of your company means keeping the technology up to date. The more efficient your technology, the more efficient your operations, and you know the rest. Staying ahead of your competition and keeping the profits coming in is only doable if you run a tight ship, so lease your equipment instead of buying it so you can your production lines and office equipment running at maximum capacity.
A bonus reason why equipment leasing will work well for your business is it looks better on your books, and if you have investors, you need that profit margin in the black at all times. Purchasing your equipment takes a significant chunk from your bottom line, whereas leasing minimizes the immediate expense.