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Beauty And The Lease

You can get almost anything you want to start your business from a leasing company. But is it really the way to go?
November 1, 2000
URL: http://www.entrepreneur.com/article/33322

Finances preventing you from launching or expanding your business? Leasing may be the answer. Today's leasing companies supply virtually everything-from cars, trucks, office equipment and furniture to machinery, computers, communications devices and store fixtures. Qualifying for equipment leasing is generally easier than getting approved for a loan, and terms are usually more flexible.

But is leasing right for you? First consider the cost (the difference between buying and leasing), then evaluate the pros and cons of each method. Leasing lets you get and use equipment you can't afford to buy, reducing your upfront cash outlay. However, your ultimate cost over the life of the asset may greatly exceed the purchase price, had you opted to buy.

But ask yourself this: Will having use of that equipment generate income that offsets any long-term cost differential? If your option is financing the purchase of equipment, you must factor in any financing costs. Leasing generally requires no down payment.

Additional advantages of leasing include:

Then there's the other side of the leasing coin (even beyond the higher costs that a thorough cash analysis will reveal):

Bottom line: Leasing is more expensive over the life of the asset, but you have immediate access to equipment with little upfront investment, thereby freeing up cash for other expenses and investments. Carefully weigh the benefits and the drawbacks before signing that lease.


Paul DeCeglie (deceglie@smallbizmail.com) is a former staff reporter for Journal of Commerce and American Banker.

Make A List

If you decide to lease equipment, keep these points in mind: