20 Reasons
There are numerous benefits of leasing, a method of financing equipment which has been popular for many years. It provides some very unique benefits over conventional bank financing or an outright purchase, and here are 20 reasons to lease equipment.
Leasing highlights the utility value of the equipment. In other words, leasing provides the opportunity to pay for equipment as it is generating revenue for the company. No different than paying employees bi-weekly or monthly as opposed to pre-paying them for the next 2 or 3 years of work. Both are assets of the company, and it makes no sense to pre-pay for either.
2. Payments Are Fixed
In most cases, lease payments are fixed for the duration of the term. This has a major advantage over conventional bank loans or purchases from a credit where the interest rate are commonly based on a floating rate. Knowing in advance what the payments will be, facilitates ease of budgeting and reduces interest rate risk.
3. Longer Terms / Lower Payments
Many banking institutions will limit the term of a loan to 12or 24 months, at which time the rate and terms of the loan are re-negotiated. Based on the useful life of the equipment being leased, it is not uncommon the see fixed lease terms as long as 48 or 60 months. This in effect lowers the monthly payment at a fixed rate.
In this era of major technological advances, certain types of equipment purchased today, can be obsolete within one or two years. Most leases offer a provision to economically upgrade equipment within the last year of the lease contract thus giving the company a built in obsolescence protection. In addition, although the leasing company holds title to the equipment, the will generally allow the vendor to provide a trade in on the existing equipment.
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