There are many benefits to leasing versus buying equipment. Every organization will have its business objectives, financial constraints, and operational goals that should be considered before deciding on the best acquisition method for the equipment. For most companies, leasing equipment offers flexibility, predictability, and lower risk. Equipment leasing is becoming increasingly more popular as businesses are experiencing the advantages and strategic value equipment leasing brings. In fact, according to The White Clarke Group Global Leasing Report, the global leasing industry has grown 131% in the past nine years, with North America representing 35.8% of the total global market share in equipment leased. In this blog post, we will uncover the advantages leasing equipment brings to businesses.
How Equipment Leasing Works
Leasing equipment allows you to use the equipment for a fixed amount of time without the burden of ownership. The advantages of leasing are:
1. Conserve cash flow
2. Hedge against equipment obsolescence
3. Keep strategic flexibility
4. Select your own path with flexible end of lease options
5. Simplify administration
The type of equipment you are looking to lease will influence how long the lease will last. The average lease term we see amongst our customers is 64 months, but leases can be as short as 8 months and as long as 84, depending on your specific requirements.
As industries continue to evolve, technology advances and the equipment you own will likely become obsolete in a few years. Leasing your equipment is one of the most financially efficient ways to ensure your business has modern equipment without devastating your cash flow or working capital.
Many organizations utilize a lease to efficiently manage its spend. The low monthly payments and fixed payment schedules allow organizations to allocate financial resources more effectively.
Advantages of Equipment Leasing
1. Conserve cash flow
The biggest advantage of leasing equipment is that payments are spread out over multiple years and you avoid the large upfront costs of purchasing equipment outright. The lease becomes a fixed monthly line item which helps you to maintain steady cash flow and adequately budget for the future. The extra capital can be used to invest in other areas of your business to drive new revenue streams or be saved for unexpected expenses. Lafayette General is one of our loyal customers and utilizes leases to conserve cash flow. Over the years we’ve worked with them on 40 leases and 30 of those leases are still ongoing. The total equipment cost is around 3.5 million while the total lease payment is only $74,000 per month with an average 30-month lease term.
2. Hedge against equipment obsolescence
Leasing allows you to stay relevant and upgrade your equipment more consistently to keep up with the technological advancements taking place in your industry. Remain competitive by leasing the most up-to-date equipment without breaking the bank. Deaconess Healthcare System, another one of our loyal customers, did just that and updated its Stryker system 7 to the latest release, the system 8, within the framework of its original lease.
3. Keep strategic flexibility
Large capital purchases can cement you to a specific technology or strategy. Leasing your equipment allows you to adjust as the industry progresses and increases flexibility for you and your organization. Maintain agility and adapt as your needs change with leasing.
4. Select your own path with flexible end of lease options
At the end of your initial term, you have the flexibility to decide what you would like to do with the equipment. You can purchase the equipment, renew the lease at fair market value, extend the lease at fair market value, or return the equipment. Based on our database, 38% of our customers in the medical sector choose to renew with Meridian when their original leases end.
5. Simplify administration
Experience a quick and easy application process. Given the right financial statements and documents, approval and implementation of a lease can be seamless.
Summary
There are many advantages of leasing over buying equipment such as maintaining cash flow through a fixed payment schedule and low monthly payments, remaining competitive without obsolete technology, and flexible end of lease options. Acquiring equipment through a lease is one of the most financially efficient ways for businesses to stay at the top of their industry. With technology and equipment advancing so quickly, leasing equipment is less expensive and allows you to keep your technology current.
Meridian Leasing’s equipment experts will help you determine the equipment that is best for your operational and financial requirements. Call +1 (855) 980-4578 or send an email to [email protected] for more details or to speak with an equipment specialist.