Looking to add equipment to your business as a revenue-generating machine? Deciding between equipment financing or leasing can seem daunting. Keep reading for our guide on understanding your options to make an informed decision.
Understand Your Financial Goals
Before making any decision, start by understanding your financial goals. Determine how much you can afford to allocate for equipment expenses while maintaining your overall financial health. After a budget is determined decide whether you prefer new or used equipment and how long you intend to keep it.
Exploring Equipment Financing Options
When considering equipment acquisition for your business, equipment financing can be a valuable route to explore.
Flexible Monthly Payments: Equipment financing allows you to spread the cost of your equipment over a period, resulting in manageable monthly payments. This can help preserve your cash flow for other essential business needs. Whether you have busy seasons and need to pay more during certain periods or want consistent payments—AP can structure it towards your business.
Ownership Benefits: Unlike leasing, where you don’t own the equipment at the end of the term, financing allows you to build equity in the equipment as you make payments. With Equipment Finance Agreements, ownership is transferred to you. This can be especially advantageous if you intend to use the equipment for the long term.
Tax Deductions: In many cases, equipment financing also comes with potential tax benefits. You may be eligible for tax deductions or depreciation allowances, reducing your overall tax liability. Consult with a tax professional to understand the specific tax advantages applicable to your situation.
Flexibility in Equipment Choice: With equipment financing, you have the freedom to choose new or used equipment. This flexibility enables you to select the equipment that best aligns with your business needs and budget. AP can help you finance new or used equipment, and we are happy to discuss your options!
Leasing can offer several compelling benefits, such as:
Lower Monthly Payments: Leasing often leads to reduced monthly payments when compared to financing or purchasing. This can be beneficial for businesses as it helps manage cash flow more effectively. However, it’s important to note that during the lease, you may not accumulate equity in the equipment as you would with financing or ownership. When the lease term concludes, if you decide to buy the equipment, you’ll need to pay its fair market value at that time.
Tax Advantages: Depending on your location and tax laws, leasing may offer certain tax advantages that can reduce your overall tax liability. Consult with a tax professional to understand the specific tax advantages applicable to your situation.
Upgrade Opportunities: Leasing allows you to swap older equipment and upgrade your equipment every few years, ensuring that you always have access to the latest equipment.
However, some other factors to consider when researching leasing options are:
Mileage Limits: Some leases have mileage limits that may not align with your business needs. How much mileage do you expect to add to the machine over the next few years?
Ownership Considerations: Unlike financing, leasing does not automatically grant ownership of the equipment at the end of the lease term. This means you won’t have to worry about equipment depreciation or resale value, but it also means you won’t own a tangible asset. Consider whether owning the equipment is essential for your business needs when making your decision. There are various end of term options and they each should be evaluated based on the needs of your business.
AP is Here to Help
Deciding between financing or leasing equipment is a significant decision that requires careful consideration. By understanding your financial goals and your options, you can make an informed choice that fits your needs and budget.
At AP, we are committed to helping you navigate the financing process with ease. Whether you choose to finance or lease your equipment or truck, we offer flexible and customized solutions to suit your unique requirements.