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You will incur various costs when you run a business, including buying or leasing the necessary equipment. Having specific equipment is vital for you to carry out your business needs. However, your company may not always have the funds to buy your equipment. This is particularly the case if you are a startup needing new or costly equipment. Therefore, you may consider leasing the equipment. This article will explain some of the benefits of equipment leasing for your business in the UK.
What is Equipment Leasing?
Before considering the benefits of equipment leasing for your business, it is vital to understand what it means to lease equipment.
Therefore, the lessor owns the asset rather than you as the lessee. As a result, they retain the asset’s title, yet you enjoy its possession and use.
When your lease agreement comes to an end, the agreement will state if you can either:
- continue to lease the equipment and make the relevant payments;
- get better equipment as an upgrade; or
- return the equipment to the lessor, as you no longer use it.
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Benefits of Equipment Leasing
There are many benefits to businesses if you choose equipment leasing. An initial advantage is that a lease is more accessible than a loan to purchase equipment. This is particularly the case if you do not have a good credit history or are a small or new business. Below are further benefits of equipment leasing.
Potential to Save Money
One of the benefits to your business if you lease equipment is that you could save money. As you are financing the cost of your business equipment, you can use the money elsewhere instead of sinking it into purchasing equipment. Your capital is, therefore, free to invest in other parts of your company as there is a little upfront cost. In addition, with capital untouched, it means that should you have a business emergency, you may have funds to cover it.
On the other hand, if you had bought your business equipment, you may lack emergency funds. Also, equipment leasing can be beneficial in terms of leaving other finance options, such as a loan, untouched. Therefore, you have this option for different business needs.
Simplifies Budgeting
If you decide that equipment leasing is for you, you will pay a monthly amount for your equipment which should stay the same. That means you know what your monthly expense for your lease is, which helps you to predict monthly costs for your business. In addition, some lease agreements allow you to opt for repayments that fit in with your business’ seasonality, relevant to when your business tends to make its money. This can also benefit cash flow, as you pay for the equipment over time rather than incurring a massive upfront cost.
Up-to-Date Equipment
When you lease your office equipment, you can often choose the most up-to-date equipment, which you would not always be able to afford if you were to buy your office equipment. Also, you can often receive this within days of signing your lease agreement.
Some lease agreements have the option to upgrade the equipment when the lease comes to an end. You usually do this by committing to a new lease with the lessor, which covers better equipment. Therefore, you can ensure your equipment is always up to date.
Having the most up-to-date equipment for your business can give you a competitive advantage. It also prevents your equipment from being a depreciating asset and becoming insufficient for your business needs in the future. Instead, the lessor bears this burden of obsolescence.
No Maintenance Costs
If you decide that equipment leasing works for your IT equipment, your lease often covers maintenance or repair costs. Accordingly, equipment leasing is a benefit, as you may bear this cost if you buy your equipment. In addition, many IT leases offer built-in protection in the lease agreement so that the lessor will ensure they resolve any problems with the equipment.
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Key Takeaways
Leasing equipment instead of purchasing may be incredibly beneficial for your business. Equipment leasing means you avoid the hefty upfront costs allowing you to save money for other areas of your business. In addition, it can help you plan your business budgeting as you know the rental payment attached to the lease. When you lease equipment, you can also obtain up-to-date equipment making your business competitive.
If you need help understanding leasing equipment for your business in the UK, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Equipment leasing is where you, as a lessee, rent equipment for your business from a lessor for a regular payment. The lessor owns the equipment as their asset, and you possess it for your business use.
There are various benefits to equipment leasing, one of which is that you can get up-to-date equipment you may not have been able to afford to buy, and you may be able to upgrade this at the end of your lease agreement.
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