Leasing as a Way of Obtaining Equipment

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Table of Contents

Introduction
Benefits of Leasing versus Buying Equipment
Conclusion
References

Introduction

Leasing equipment is whereby a company or an individual obtains equipment for use and pays for the services derived from the use of the equipment as per the lease contract while buying is where a company or an individual obtains equipment by paying for them first before use and the ownership changes from the seller to the buyer.

Depending on basic parameters like cost, time and quality, and the available capital, the company may choose to lease or buy equipment (Burt, Petcavage & Pinkerton, 2010).

Benefits of Leasing versus Buying Equipment

There are several benefits of leasing equipment as compared to buying equipment. The option of leasing helps a company to save money on the initial cost as compared to buying equipment. For the lessee to get into the contract, the requirements are the down payment and signing of the contract.

This allows the company to obtain equipment without affecting the cash flow. Leasing is better in comparison to buying equipment since buying of equipment may require a lot of funds, which have to be cleared before a company is allowed to use the equipment. Leasing helps a company to avoid getting stuck with old equipment as compared to buying.

Since the equipment does not entirely belong to the company, as in the maintenance and possession of the equipment is still under the leasing company, the lessee is at liberty to take the equipment back if it gets old and if the equipment is no longer in use may be due to change of business activities (Burt, Petcavage & Pinkerton, 2010).

For all assets that are obtained via lease, the company benefits from tax exemptions since it is considered as a business expense as compared to buying where not all assets qualify for the exemptions. For example, in real estate, inventory bought for sale and properties bought from close relatives (NOLO, 2010) do not qualify for tax exemption.

Due to flexibility of a lease, it is more useful for a new company that has no much capital since it is easier to obtain equipment as compared to when a company has to get into debts to obtain the equipment. This makes it easy to go for equipment with equivalent value of the available capital the company has at the moment, and if they need a more expensive one, the company will obtain it at a time when it has enough capital.

When a company needs equipments that gets outdated in a short time, leasing is the best method to take since if the equipment is bought, it will be the responsibility of the company to dispose it which would likely happen at a throw away price hence the company will lose money.

For any given company to perform well and in a cost-effective way there should be a consideration for its capital. The amount of capital available is just but one of the factors that should determine whether equipment should be purchased or leased (Burt, Petcavage & Pinkerton, 2010).

Conclusion

Therefore, leasing as a way of obtaining equipment is better as compared to buying. For any given company, whether small or big, there is a need to consider its financial position and wise decision be made in order to increase productivity without necessarily getting into debts. The significant factor should be to get the equipment on-site in time to ensure that production continues.

References

Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2010). Supply management (8th ed.). Boston, MA: McGraw‐Hill.

NOLO. (2010). Business Equipment: Buying vs. Leasing. Legal Encyclopedia. Web.

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Leasing as a Way of Obtaining Equipment

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