The Disadvantages Of Leasing Business Equipment
There are two main types of disadvantages in leasing business equipments. The first one is related to costs, while the second one is related to the ownership of the business equipments you are leasing. When we think of the overall cost, almost all business equipment becomes more costly if we decide to lease it instead of making outright purchase. Let us understand it with the help of an example. If we decide to lease a computer that has a market price of $4,000, we have to pay the total amount of $5760 at the rate of $40 per thousand per month. This is the standard rate of leasing business equipments. On the contrary, you need to pay only $4,000 when you decide to purchase it outright.
No Built in Equity:
In addition to paying the higher cost, you are not able to build any equity in the business equipment you have leased. This is because you are not the owner of the business equipment. This is a very big disadvantage of leasing business equipments. This lack of ownership is also responsible for the increase in the overall cost of the business equipments, because you also pay to the lesser for carrying the risk of the ownership with him. Moreover, the payments for insurance charges and taxes, further increases the cost of acquiring the business equipment.
High Early Cancellation Charges:
One more disadvantage of leasing business equipments is that irrespective of the fact whether you are using the business equipment or not you need to pay for the total term of the lease. In some cases, you may get the facility of lease cancellation if you do not need the leased business equipments any more. However, this is at the cost of very high early termination fees.
Tax Deductions:
It is also possible that IRS do not accept the leasing of business equipments as purchases for the tax benefits. In that case it will be a great disadvantage. In the beginning, when we lease business equipments that we require immediately for the growth of the business, it looks beneficial for us. However, in the long-term there are several disadvantages of leasing business equipments. During the term of the lease, you pay not only for the cost of the business equipment, but also for the charges of the leasing company. Even, after the end of the lease term, you are required to make rental payments for using the business equipments.
Cost of Maintenance:
Not owning the leased business equipments does not save you from the onus of maintaining it. If your staff is not capable of repairing, then it may become a very costly affair in case of serious fault.
Alexander Gordon is a writer for http://www.smallbusinessconsulting.com - The Small Business Consulting Community. Sign-up for the free success steps newsletter and get our booklet valued at $24.95 for free as a special bonus. The newsletter provides daily strategies on starting and significantly growing a business.
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