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When the time comes for your company to replace a worn-out machine, you have the option of buying or leasing a new one. While there are drawbacks of leases, there are many advantages that make leasing a better option in many situations. Here are three ways you can benefit from choosing to lease your equipment rather than purchasing it outright.
It Makes Budgeting Easier
When you own a machine and it breaks down, you will have to pay for the repairs on the machine. In some cases, machine repairs can be extremely expensive, and you never know when a machine will break down.
One of the highlights of leasing equipment is that repairs are included in the costs of the lease. Leasing is like renting. You are borrowing the machine for a certain length of time, but you never really own it. While this issue can be viewed as a drawback of leasing, it can actually be a huge benefit to you, especially if the machine breaks down often.
Because of this, you will have an easier time with your budget. You will know in advance how much the lease payments are monthly, and you will never have to worry about small or large repair bills for the machine.
You Can Upgrade Regularly
Keeping your machinery in good-working condition may help your business operate more efficiently, but this can be hard to do if you own old equipment. When you lease heavy machinery, you can choose the length of the lease. You might choose five years or ten years, but when the lease is up, you will get to trade the machine in for a newer model.
If you own a machine, you may be stuck trying to sell it before you can upgrade to a new model. You may also have the option of trading it in, but you might not get a lot of money for it. You may also owe a lot of money on it after five years and trading it or selling it would not make sense. This means that you may be stuck with your machinery for a very long time, and as it ages it may begin to break down more often.
It Offers More Depreciation
Depreciation is an expense you can take for any type of fixed asset you own. When you lease equipment, you can also take this expense. To depreciate an item, you must use a formula to determine how much value the machine loses each year. When you calculate this amount, you will get to claim this as an expense on your taxes and financial statements.
Claiming depreciation expense on your taxes helps lower your bottom line, and it is an expense that you should take each year. While there are many different formulas used to calculate depreciation, there is one general fact about it. Depreciation is generally higher at first, and it tends to decrease over time.
If you lease new equipment every 10 years, you will always have a decent amount of depreciation to write off. On the other hand, if you purchase new equipment every 15 to 20 years, you will have years where there is no depreciation. This occurs because a machine has no value left after a certain number of years. Losing this depreciation expense can result in a higher tax liability.
Heavy equipment leasing is very popular, and it is something you may want to consider doing if you need a new item. You can find out more by visiting a company that sells and leases all types of heavy machinery and equipment.Share
18 November 2014