The Positive and Negative Aspects of Commercial Equipment Leasing
Commercial equipment leasing allows companies to have property of an asset but only for the duration of the agreement. Just like you do with car insurance, you will only be paying for the right of using the asset you will not own it. Commercial equipment leasing grants ownership to the lessor but he or she has to pay for that service.
The importance of Commercial equipment financing is the flexibility it provides for the company since it does not restrict their possibilities of taking an immediate change of plans or not to take industrial action planned to seize a good opportunity or adjust to changes that occur in the middle of the operation.
Business equipment leasing is ideal for financing in parts, which allows the company to resort to this means of acquiring smaller assets. Moreover, lease payments are tax deductible as operating expenses, so the company has higher tax deduction when making the lease. For the marginal firm business equipment leases are the only way to finance the acquisition of assets.
The risk is reduced because the property is leased, and may be ready to operate when other creditors were unwilling to finance the company. This greatly facilitates the reorganization of the company.
Some of the advantages of Commercial equipment leasing are:
The fact that it is more flexible and often the maintenance costs are included. Given that the company does not own the equipment, they do not have to worry about it becoming obsolete. It is attractive for small business that risk going out of business.
Disadvantages of Commercial equipment leasing
The price you pay for Commercial equipment leasing is not having the ownership of the equipment at the end of the contract. It is a high price to pay especially when it is also includes high interest rates.
Commercial equipment leasing is almost similar to paying a short term loan without obtaining property of the asset at the end. The payments are all equal and distributed for the same amount of the calculated value of asset throughout it is estimated life. The company cannot sell the good at the end of the contract because it is taken away.
Some contracts for Commercial equipment leasing cannot be broken. This is highly inconvenient and expensive for companies that for one reason or another decide to stop using the equipment before the end of the contract. Despite the justifications, companies have a legal commitment to pay for the service.
At the end of the contract, the equipment continues to belong to the lessor in spite of all payments made.