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When looking for business equipment you have two acquisition options: purchase or lease. Depending on your circumstances, either options can be the right decision.
Leasing has a number of advantages as well as disadvantages. You should consider these factors, among others.
- Cost: Leasing has lower up front costs and may be good for business start-ups. This gives new businesses time to become established in the marketplace with the maximum cash to handle slow periods of growth.
While leasing may be good for start-up, it can be more costly in the long term. While the value of the leased equipment goes down, you are committed to a long term course of payments that may not be in the best interests of your business.
- Contractual term: The contractual terms of the lease may seem favorable in the beginning, but over the course of the contract you may find the equipment inadequate for your needs. You should ensure that the contractual terms are favorable to potential market conditions in the future.
- Support and maintenance: Part of your lease payments normally include ongoing support, maintenance, upgrading, and possibly even training. You can also lease software to help manage your business and customer accounts. The options you negotiate in the lease agreement can provide the equivalent benefits you would get from increased staff.
- Flexibility: Your lease agreement should contain options for updating or replacing your equipment, software, furniture if the business need arises.
- Tax advantages: Most business lease payments can be deducted in that year they are paid. This lets you deduct more from profits than you would if you depreciated the items, increasing available money for your business.
There are also advantages to purchasing equipment.
- Lower lifetime costs: For most products, a purchase will be less costly than ongoing lease payments. But, you must also consider the interest cost of any loans you must make if you borrow to obtain equipment.
- Monthly overhead: Once you lease an item, your payments continue without regard to your cash on hand. Purchases made when cash on hand is adequate do not strain future revenues.
- Tax advantages: Accelerated depreciation can allow major purchases to significantly reduce your tax liability. So, if money is available for a purchase, you can reduce you tax consequences more by purchasing.
Assets and liabilities: Items you purchase are the assets of your business and thus enhance your bottom line. Lease payments count as liabilities and reduce your company's value. This becomes important when your business is evaluated for extensions of credit or public offerings.
You will need to evaluate your current situation to determine if leasing or purchasing will better suite your need.
The following are resource you can use related to business equipment and services:
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Office Equipment in the News
Office Equipment News
Office Equipment news continually updated from thousands of sources around the net.
Xerox Corp. has lost a tax dispute with the state of Wisconsin involving millions of dollars of equipment leased to Milwaukee and La Crosse.
Xerox's Agenda: Help Print Providers Grow and Succeed
Xerox's booth, one of the largest at 28,000 square feet, will highlight customer applications, and will showcase what's ahead in automated packaging, dual-engine color presses, continuous feed and wide format.
Avery Dennison to pay $200,000 fine
Adhesive-label maker Avery Dennison Corp. has settled a case that accused the company of promising or making improper payments to foreign officials.
Office Depot Partners with Leading Athletic Retailer
Office Depot , a leading global provider of office products and services, and Foot Locker, Inc.
More local jobs are being lost with the announcement this week that National Envelope is shutting down its Hamburg operations.
SEC settles cases against Avery Dennison
Adhesive label maker Avery Dennison Corp. on Tuesday settled a case that accused it of promising or making improper payments to foreign officials.
Office Depot loss widens; shares drop
2 U.S. office supplies retailer, and its shares fell 13 percent. The recession has hit sales of office supplies hard as consumers and small businesses buy fewer big-ticket items like furniture and computers.
Stocks slide on earnings, weaker confidence data
Jitters about the economy are putting the stock market rally on hold. Major stock indicators are down 1 percent Tuesday after a closely watched measure of consumer confidence fell more than expected in July.
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