Benefits of Equipment Leasing
by VENDIREX on 06/09/2015 - 03:03 pm |
Tag: Equipment Leasing
Purchases of equipment can not only involve substantial expenditures, they can also put limits on how up-to-date your company is able to remain. In today’s world, technology is ever changing; while you are busy purchasing a one machine - whether it’s a business grade printer or the latest Macintosh computer - a new one is being manufactured or conceptualized for a demanding public.
One of the best ways to keep your office equipment and machinery at the cutting edge of technological advances is to lease them. Rather than outright purchases of high end units, which are obsolete by the time you have been fully able to depreciate their cost, a lease allows you to continue to upgrade every few years to the latest and greatest model.
Sure, you do lose what may be regarded as an asset on your books. Then again, by the time that asset is fully depreciated, its value is nil and its effective life span may be fully depleted as well. Now you have an antiquated product which is out of warranty, and beginning to require more maintenance. After all, most machinery is built to last just so long. Meanwhile, your lease payments are fully deductible (in most cases) as an office or supply expense.
Types of Equipment Leases
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Finance aka Capital Leases - These contracts are meant for the company wanting to actually retain the item after the lease expires. Generally there is a minimal buyout at the end of $1.00. Keep in mind though, these payment terms will usually last just about as long as the anticipated life of the machinery. And, importantly, this type of lease is not fully tax deductible as it is more of an installment financing arrangement than an agreement of use.
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True aka Operating Leases - This type of agreement is usually shorter, with less expensive payments. Why? Because the vendor can resell the used product after your lease has run its course. You may have the option to buy the item at ‘fair market value,’ though generally the true advantage of a true lease is to allow you to move on to new, updated equipment. All the while, you get the benefit of a full tax deduction of this ‘operating expense.’
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