All the Answers You’ve Needed About Equipment Leasing
Every business needs equipment, and depending on your industry, it can be very expensive. Many companies choose to lease equipment rather than buy it outright or finance it. If you’re considering equipment leasing, here’s what you need to know!
The difference between leasing and financing
When financing equipment, you have received ownership at the start of the plan, and maintain it during and after the payment period. If you’re leasing equipment, however, the lender maintains ownership, and you pay to use it until the end of the lease. Generally, office equipment leasing is structured in a lease-to-own plan, meaning the lender doesn’t necessarily take the equipment back at the end of the term. A nice advantage of equipment leasing is that the lender generally assumes service cost for any reasonable malfunction or issue during the leasing term.
The length of a typical lease
There are many variables that can affect the length of an equipment lease, but a good baseline is usually 24-60 months. You may want a plan that can be paid off quickly, in which case you would opt for a shorter-term length, closer to the 24-month side. If you’re more concerned with having a smaller monthly payment, you may want to try for a 60 or even 72-month lease.
What happens at the end of a lease
In most cases with equipment leasing, as opposed to a lease on a car, the lender won’t automatically take the equipment back at the end of the lease term. We mentioned lease-to-own plans earlier; when you reach the end of the lease you’ll pay an agreed-upon additional amount and assume ownership of the equipment. The range of that amount can vary. Sometimes it’s as little as a dollar, or sometimes it’s closer to 20% of the equipment’s purchase cost. In many cases, the payoff amount can still be broken down into smaller payments if it’s on the higher side.
How to qualify
While financing and leasing are different in many ways, they are similar in that a lender will evaluate your credit to determine if you qualify. That’s not to say that you need perfect credit. But the higher your credit score is, the more likely you’ll qualify for a lower interest rate and/or be able to negotiate the length of term that suits you best.
Equipment leasing can be a great way to get what your company needs to get the job done without having to put down a great deal of cash up front.