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Leasing of Equipments: Pros and Cons

A talk by Emmanuil Kozlov

About the Talk

February 15, 2015 11:00 PM

Many organizations and companies nowadays prefer to lease their business equipment needs. They have come to realize there are a lot more to consider and tons of paper works once you own something. Plus, equipments tend to be outdated overtime with the fast pace of technology and modern world. Nevertheless, there are still people who worry on whether to lease their equipments. It does not matter if you are in Males in Maldives or Jakarta, Indonesia or in some part of Antarctica but you have to be aware of these pros and cons in leasing equipments.

Pros • Leasing can save you the time and hassle involved in finding someone who will extend you credit for purchasing equipment. • Once your equipment is already outdated, you can change and swap your old ones to something latest in the market and keep pace with technology. • Short-term leases give you the opportunity to evaluate whether the equipment fits your needs. You may not need the material later on and therefore you can’t risk keeping it in your garage for a lifetime. • Maintenance may be included in the lease, saving you additional costs. • If you use the leased asset in your business, you may enjoy a potential tax advantage because your lease or rental payments are fully deductible under section 179 tax benefits.

Cons • For startup businesses, owners are more likely to spend his own money to secure the leased equipment • You do not own it. If the equipment is much use to you, you cannot claim it for your own. You are always at the mercy of your leasing company and should always follow the guidelines they have set. • You are obligated to pay for it. Even if you are not using it, you are obliged to pay for the entire duration of the lease contract. Some companies either charge large fees for early termination or impose penalties for it or the lease is non-cancellable.

Warning Signs and Tips • There are a lot of leasing companies out there that provide faulty rates and set impossible expectations. Watch out for promises that seem too good to be true. These kinds of companies may be frauds or scams. You can search online for legitimate companies such as Axis Capital Inc. or group of companies that can be trusted for your leasing needs. • The purchaser needs to read the lease agreement several times before signing. Ask the right questions and make sure to qualify and verify everything. If your leaser can’t ask answer you directly but gives vague statements, it is okay to doubt. • Everything should be documented. At the end of the lease, the organization may automatically own the equipment, purchase it, or renew the lease. The end-of-lease options should be on the lease agreement. The lessee must take care to identify if the lease agreement has an automatic renewal clause. • If you have experienced foul actions against your leasing company, you can file a complaint to any government agencies such as the Better Business Bureau. Just remember that the business owner should file the complaint himself as these agencies do not entertain third parties.

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