Renting and leasing are similar in some ways, but are very different in others. Though both options help you to break down the cost of equipment into manageable amounts, they differ in structure.
Advantages of Renting
Cost Effective. If you only need the equipment for a short period, renting can be the most cost effective option.
Lower Risk. With renting, you avoid the risk of investing in equipment that might not be suitable for your business needs.
Avoid Maintenance Costs. Typically, rental equipment includes full maintenance. This way you aren’t responsible for testing, repairing or servicing the equipment when the time comes.
Disadvantages of Renting
Expensive. Long-term rentals can be more expensive than other methods of obtaining equipment. If you need a piece of equipment for a long period, renting might not be the right option for your business.
No Ownership. With renting, there is no opportunity to own the equipment at any point. You don’t have the chance to extract the most value from the equipment.
Before you consider renting your next equipment, ask yourself the following:
- What is the monthly cost of renting equipment?
- Who is responsible for servicing and/or repairing the equipment?
- Do you need insurance coverage? If so, what is the total cost?
Advantages of Leasing
Strengthen Your Cash Flow. Leasing helps you preserve your cash flow, so you can use your cash in other areas of your business. This also allows you to keep your credit line open to strengthen your cash flow during your lease term.
Tax Benefits. Leasing allows you to expense the equipment costs, meaning that your monthly lease payments can be deducted as business expenses. Learn more about leasing tax benefits here.
Ownership Opportunity. You have the option to secure ownership of the equipment at the end of the lease term with Lease-to-Own financing programs. This will allow you to make the most of the equipment’s useful life for more than just a few months.
Disadvantages of Leasing
Commitment. With a lease, you are obligated, by contract, to pay for the entire lease term, making this option more of a commitment.
Maintenance Costs. Equipment may not come with maintenance perks, depending on the leasing company and/or lease terms. This can end up being costly.
Before you consider leasing your next equipment, ask yourself the following:
- What happens at the end of the lease term?
- If you want to purchase the equipment, what will the purchase price be?
- What is the down payment? What is the monthly payment?
Weighing Your Options
Now that you better understand the difference between renting and leasing, you can feel more confident in obtaining your next piece of equipment. Still not sure whether renting or leasing is the right option for your business? A financing calculator can help you make the decision.
With a financing calculator, you can figure out a lot about your equipment budget. Not only will you be able to get an estimated monthly payment, but you can also find out what your breakeven would be, how much tax savings you qualify for, and your potential term length. Once you’ve calculated the cost of leasing your equipment, compare it to rental costs over a period of time. Acquiring a new piece of equipment doesn’t have to put a huge dent in your wallet, there are options that make it possible.