If you are going to invest in your business soon, its worthwhile understanding the benefits of leasing.
Leasing for equipment is a business finance product designed to efficiently fund equipment for commercial businesses.
It is a contractual agreement between the lessee (user) and the lessor (owner) for use of an asset.
Benefits of leasing
The benefits of leasing include, but are not exclusive to;
- Leasing is especially useful for complex or expensive assets that require service and specialist knowledge to install and maintain.
- It is useful if the asset is likely to become obsolete fast and will need constant updating.
- Leasing preserves capital expenditure and therefore can release liquidity for the running of a business.
- It can prevent a business accruing debt on its balance sheet to acquire assets outright.
- Leasing the asset allows a relatively short-term (12 months to 5 years) use of a business asset, in which time it can be determined whether or not it is business-critical.
- This also allows for flexibility on whether there is economic growth, and businesses can trial and test assets based on demand.
- Leasing allows businesses to be insulated from the depreciation in the value of assets over time. Whenever assets are purchased, they immediately lose value.
- Costs are fixed over the term of the lease and the lessee does not have to sell the asset at the end of the lease, meaning it does not have to take the risk of changeable residual values.
- Because the equipment is funded by specialists it can be funded at good value – other forms of funding business assets can be more expensive, such as overdrafts or non-specific business loans.
- Leasing in specific cases is more tax-efficient than other forms of funding.
Assets that leasing is commonly used for include; manufacturing and mining machinery; vessels and containers; construction and off-road equipment (yellow goods); medical technology; agricultural equipment; aircraft; railcars and rolling stock; trucks and transport equipment; business; retail and office equipment and IT and software.