If your company is considering equipment leasing over buying, don’t forget these 5 important things to know before signing any contracts.
For small business owners, the expense of maintaining an office that is stocked with the latest technology and equipment can sometimes present a challenge. But, having the right tools to run a company is crucial.
Equipment leasing gives businesses the opportunity to have updated essentials that can help produce high-quality results, without breaking their budget.
In today’s market, companies can lease practically anything that’s required for operation. From office machinery to furniture, there are a variety of rental options available. These can often help small businesses to save money by cutting the up-front costs associated with running a business.
Are you considering the possibility of leasing for your business?
There may be some things that you haven’t thought about. Like most decisions that involve spending, there are both pros and cons to leasing.
Read on to find out what you need to know before signing any rental agreements!
A Business Owner’s Guide to Equipment Leasing
When deciding if equipment leasing is right for your business, knowing the facts can help you to make the best decision.
We’ve come up with a list of the top things you should know to make sure you’re informed before renting equipment for your company.
5 Things to Consider When Leasing
With certain office equipment, it’s not reasonable for a small business to spend several thousands of dollars to purchase a new model every few years when it is available for rent at a fraction of the sticker price.
There are standard lease programs where you pay a monthly fee, but the property remains under the ownership of the lessor.
Other programs offer a lease to purchase option, where after a certain amount of accrued payments, you become the owner of the property.
Depending on the total amount of your combined payments, you may find that in the long-run, you will pay more than it would cost if you were to purchase the equipment outright.
In some cases, however, it may be the only affordable option for you at the time. And, there may be times when it ends up being a more cost-effective plan.
2. Repairs and Maintenance
Although you never gain ownership when leasing, the advantage of these types of programs is that the owner is usually responsible for the repairs and maintenance.
This may not be the case with a lease to purchase option. And, unless there is an active warranty on equipment at the time of purchase, you are responsible for maintaining any equipment that you buy.
Certain office equipment, such as copy machines, can often present minor repairs that can be fixed easily by professionals. However, if someone who is not trained in this field attempts a repair, it can turn into a much more complicated and expensive problem.
Often, copier leasing companies will include routine maintenance and repairs in their monthly rental fee. Since copy machines are typically one of the more expensive pieces of office equipment to purchase, and they require additional expense and expertise to maintain, many businesses prefer leasing.
When leasing, you need to find out if equipment requires professional maintenance and repair. If so, then make sure that you find out if it is included as part of your rental agreement, or if it will incur additional costs.
3. Terms and Conditions
When leasing equipment, make sure that you understand the terms and conditions of the contract and all conditions relevant to the equipment that you are leasing.
Your contract should include the following:
- Duration of Contract
- Who is Responsible for Repairs and Maintenance
- The Cost Per Month
- Total Cost
- Buy-out Options
- Who is Responsible for Additional Taxes and Fees
- Procedures for Broken, Damaged, or Lost Equipment
These are just a few of the important things that your contract should cover but there is likely to be much more addressed.
Before signing any agreement, make sure that you understand fully the terms of the contract and have all of your questions answered.
4. Additional Fees and Tax Information to Consider
Equipment leasing also may incur several additional fees that your company may be responsible for paying. You should inquire about any fees, pay schedules and amounts prior to signing a contract.
Fees may include:
- Insurance – Liability insurance for equipment ranges from $200 to $2,200 annually, with many businesses reporting costs of $1,000 or less
- Extraneous costs – maintenance and repairs, legal fees, fines and certification expenses
- Return of equipment – This includes transportation and /or costs of shipping
- Fees – These might include a wide range of fees, such as a one-time “documentation fee” or other costs, so be sure to check your contract carefully
Often, equipment leasing can be deducted from your business’s taxes as a Section 179 Qualified Financing item. Ask your accountant or bookkeeper to take advantage of any tax credits towards company taxes.
5. Choose a Reputable Dealer
Check with colleagues or online resources to find equipment leasing dealers who are reputable within their industry.
Companies that are brand new and have no credible public references may not be a wise choice.
There have been circumstances of scams and ripoffs, so you should be leery of this when making a decision.
If a leasing company has been in business for at least ten years and has a positive record of customer reviews, then they are probably a safe bet.
Forms and Templates for Contracts
Check out forms and contract templates before you structure your own leasing agreement. This will help you to find out the standard terms and conditions to look for, as well as alert you to any specifics you may want to include.
Download the free forms and templates that you need for your business documents now!