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Equipment Leasing: Weighing the Pros and Cons

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Equipment Leasing: Weighing the Pros and Cons

By NicoleD
Published: August 26, 2010 Updated: January 9, 2013

Most business owners work to save as much money as possible during the startup of their business. While it may be easy to do without certain luxuries, there are some unavoidable costs that have to be paid one way or another. Acquiring the equipment necessary to run your business is one of those costs. Although leasing is not right for everyone, it is a good alternative to buying equipment, and in some situations it can be just what your business needs to succeed.

Why should I consider leasing my equipment?

Pro: Leasing allows businesses to get the equipment they need without having to pay a full cost upfront. By leasing your equipment, you will endure less initial costs than if you were to make full purchases but still get the products you need.

Con: Often times, leasing can end up costing more money in the long run. With a deposit, your monthly payments, and interest, you may end up spending $5,500 on a product that originally cost $4000.

Are there tax benefits or areas to save money through leasing equipment?

Pro: The full cost of leasing equipment is generally deductable from taxable income.

Pro: Leases lasting 5 years (sometimes 7) allow for the cost of your assets to be claimed as capital allowances.

Con: Capital allowances cannot be claimed for assets on leases that are less than 5 (sometimes 7) years.

For more information on the tax advantages and disadvantages of leasing equipment, review the IRS Guidelines.

Will my finances be easy to manage while I lease equipment?

Pro: Making monthly payments over time allows you to budget your funds and limit unexpected expenditures.

Con: Lease agreements can be intricate and complex, sometimes making them more complicated to manage than an outright sale.

Will I receive any perks in my lease that I wouldn't receive when I buy?

Pro: Leasing companies often take responsibility for the maintenance of their leased equipment. Knowing that these problems will be taken care may take a large burden off of your business. Having your leasing company take responsibility for the upkeep can also save you money if they receive a discounted rate on maintenance fees such as replacement parts and labor costs.

Con: Although leasing agreements can come with some perks, they can also be rigid and unbreakable, tying businesses to them for many years. In some cases, businesses will be forced to continue making payments for equipment even if they are no longer using it.

Will I be able to access the same equipment when leasing?

Pro: Often times, leasing allows businesses to have access to a higher standards of equipment than the business could afford if buying it outright. Making smaller monthly payments can help a business obtain a product that they would not generally be able to afford.

Pro: Leasing makes upgrading equipment easy. Because technology is constantly evolving, your company may want to use a new model after several years. Rather than having to worry about getting rid of your current model and purchasing a new one, you don't need to worry about sales.

Con: Unfortunately, with leasing you are always at the mercy of your leasing company. Because you don't actually own your equipment, subject to following their guidelines and susceptible to reposition upon their request.

Resources and Discussions

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If you can claim ownership on your own equipment it is much, much better and you can claim deductions on your taxes on depreciated value of that equipment. It's a good idea to look into loans to buy things like this. Anyone interested should look at our funding options at https://shieldfunding.com.
This is a very informative article. If you are seeking equipment leasing options, National Business Capital can provide you with options by offering affordable monthly payments through customized terms specific to your business. To learn more, visit NBC's equipment leasing page: http://www.nationalbusinesscapital.com/financing-programs/equipment-leasing-financing/
Leasing equipment is becoming a popular avenue for most business owners who are either just starting or planning to have an expansion. I believe that they are seeing the benefits of leasing equipment vs buying the equipment on a long term basis. It would also be good to note that the success of equipment leasing is also dependent on the kind of leasing companies you choose. One needs to look for reputable companies that give value to their customers and have a long standing integrity in the business community
Great article on the pros & cons of equipment leasing. Equipment leasing is appropriate for any type of business-small or large, at any stage of development. In addition to financing equipment purchases, leasing and financing can also be used to finance the soft costs associated with equipment purchases such as installation, shipping, and training services. In addition, leasing or financing usually costs around the same as bank financing, however there is a convenience associated with leasing and financing because it is more easily obtained.
If your business is seeking to acquire equipment, the Equipment Leasing and Finance Association offers "10 Questions to Ask" to help determine how lease financing can benefit your company. Visit ELFA's Equipment Finance Advantage website at http://www.equipmentfinanceadvantage.org/10Qs.cfm
Excellent article in regarding leasing. Leasing and financing beside the tax advantage it also allow you to build your business credit, securing another credit reference, and opening up large financing projects in the future since you have a relationship with the lesser.
Although leasing agreements can come with some perks, they can also be rigid and unbreakable, tying businesses to them for many years. In some cases, businesses will be forced to continue making payments for equipment even if they are no longer using it.
This is an excellent overview of the pros and cons of equipment leasing. The long-term relationship you have with your leasing company is of utmost importance. Make sure to check references and business ratings before you make this very important decision for your small business.
Great article. Leasing is a great way to acquire equipment for small businesses in a variety of sectors without having to pay 100% cash up front. It is also recommended that business owners consult with their tax professionals to see if what tax benefits they are eligible for by leasing their equipment. The tax laws are complex, and every business' situation is unique, so this is a good thing to do before deciding on an equipment lease. In addition, a tax professional is up-do-date with the latest developments in the field of business taxes, and he/she will know the best approach for you.

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