Subscribe to Entrepreneur for $5

Equipment Leasing Checklist

When deciding to obtain equipment, you need to determine whether it is better to lease or purchase the equipment. Use this checklist to compare the costs for each option.

Opinions expressed by Entrepreneur contributors are their own.

Leasing equipment can help your business stay up-to-date with the latest technology. Other benefits of leasing include making lower monthly payments than you would have with a loan, getting a fixed financing rate instead of a floating rate, benefiting from tax advantages, and conserving working capital by avoiding cash-devouring down payments. Leasing also has its downside, however: You may pay a higher price over the long term. You are also committed to retaining a piece of equipment for a certain time period, which can be problematic if your business is in flux.

Every lease decision is unique so it's important to study the lease agreement carefully. To help you put together an equipment leasing package that best suits your business, consider these issues.

What equipment do you need and for how long?

Do you want to bundle service supplies, training and the equipment lease itself into one contract?

Have you anticipated your company's future needs so you can acquire adequate equipment?

What is the total payment cost?

Also ask the following questions about each leasing source you investigate:

Who will you be dealing with--is there a separate company financing the lease? This is not desirable.

How long has the company been in business? As a general rule, deal only with financing sources that have been operating at least as many years as the term of your proposed lease.

Do you understand the terms and conditions during and at the end of the lease?

Is casualty insurance (required to cover damage to the equipment) included?

Who pays the personal property tax?

What are the options regarding upgrading and trading in equipment?

Who is responsible for repairs?