The following is a list of pros and cons to consider before deciding to rent equipment.
The first is ownership. The biggest disadvantage is that at the end of the contract, you do not own the equipment. Obviously, this can very well be an advantage, especially in the case of computer equipment where technology changes rapidly.
Total cost. The cost of renting equipment is generally higher than buying it, but this is only assuming you don’t need a loan to buy it. Let’s say you are leasing computer equipment for a total of $5,000 for 3 years, paying a fee of $40 per month, the total cost would then be $7,200.
Search for financing. Granting a loan is a long and difficult process. On the one hand, a financial institution will require documentation that shows your credit history of the last two or three years. Instead, an equipment leasing company will only ask for your credit history from the previous semester. This is clearly an advantage of equipment leasing.
Increase cash flow. One of the reasons people prefer equipment leasing is to increase working capital. When you don’t have to spend a lot of money on equipment in the first year, then you have more financing available for your operations.
Leasing equipment may mean you pay more taxes. When you don’t buy equipment, you reduce the amount of assets on your books and therefore depreciation. Equipment leasing will be recorded as a business expense and your books will not show any asset acquisitions.
Equipment leasing has an advantage when it comes to high-tech equipment. State-of-the-art computers and machines have a failure, they lose their value faster than any other asset, which means that after two or three years they can become obsolete. Technology advances extremely fast, and it can be expensive for you to buy expensive new equipment that won’t be as efficient after a few years. However, if it’s your company’s policy to move equipment from one department to another, buying it wouldn’t be such a negative.