Equipment Leasing and Financing

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Is Equipment Leasing Cheaper Than Financing?

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Millions of businesses lease or borrow their equipment instead of buying it. But isn’t office equipment leasing more expensive than purchasing items outright? It all depends on your situation. If you’re just starting out, you want to expand your business, your needs change frequently, or the equipment gets updated regularly, leasing might work out cheaper in the long run.

Is Equipment Leasing Cheaper Than Buying?

Buying an item outright generally costs less than leasing it. However, that doesn’t mean it’s the best financial decision. Often, leasing is the superior option because it allows companies to preserve their capital and use it to expand their operations. Leasing is also much more flexible, so it’s perfect for business owners who don’t yet know whether they’d like to keep their equipment in the long run.

Currently, we are experiencing high inflation. In 2021, the inflation rate was 7%, and in 2022, it was 6.5%. Because equipment prices are increasing so fast, it’s not always cheaper to wait until you can afford to buy your items outright. When you take out a lease, you lock in the current price because your payments are fixed for the duration of the lease. This makes it easier for you to budget and reduces the impact of inflation on your company.

When Is Office Equipment Leasing the Best Solution? 

If you have a lot of capital and you already know that you’ll need your equipment for many years, buying is often cheaper than leasing. But most of the time, business owners only have a limited amount of money available, and they have to either take out a lease or wait for several years to purchase furniture and tools. In this case, leasing is the better solution because it grants businesses access to essential items much more quickly.

Leasing is also suitable for people working in a dynamic industry or those who don’t yet know which direction they want to take their company in because it allows them to remain more flexible. At the end of a lease, there are several options, so business owners can try out a piece of equipment and then decide whether they would like to buy it or give it back.

You Need Your Capital 

Most companies have limited funds and credit available to them. They need to cover rent, salaries, utility bills, raw materials, and equipment. Because many businesses’ budgets are tight, important purchases often have to be delayed. This puts companies at risk, especially if the items are essential to the running of the business.

Leasing is a good option for people who don’t have enough money to purchase costly equipment upfront. Often, leased items help companies to attract new customers and improve their product or service. A lease might cost more than an upfront purchase, but it is well worth it if it allows the business to become more profitable. It also preserves lines of credit, so business owners keep their borrowing capacity for emergencies.

You Are Just Starting Out

Setting up a small business can be extremely costly. Depending on your industry and the kind of company you want to start, you might need a physical space, employees, raw materials or ingredients, large pieces of equipment, furniture, decor, and licenses. Each of these items can cost hundreds or thousands of dollars. Leasing some or all of your equipment takes a lot of the pressure off and allows you to get started more quickly.

Most equipment leasing companies prefer to work with businesses that are already well-established, but there are options for startups. At Noreast Capital, we’re happy to work with new business owners as long as they can demonstrate that their personal finances are in order and that they have a solid business plan.

You Want to Expand Your Business  

Many companies that have enough money to purchase items upfront still opt for leasing because this allows them to use their capital more productively. This is especially important if the business owners are focused on growth. By leasing a large portion of their equipment, they can buy more inventory, spend more on advertising, or even set up a new branch.

Your Needs Change Frequently 

Many industries are rapidly evolving. During the Covid-19 pandemic, countless companies were stuck with expensive pieces of equipment and furniture they couldn’t use because their employees had to stay at home. Leased items could be returned as soon as the term was up, but business owners who had taken out a loan or paid for their equipment upfront had to keep it, even though there was no need for it anymore.

If you’re not sure how your industry or your company will evolve, don’t buy expensive items outright. Often, equipment loses its value once it’s been used, so you’re unlikely to recuperate much of the cost if you sell it a year or two later. When you lease, you can re-evaluate your company’s goals and needs frequently and decide whether you’d like to keep your equipment, give it back, or choose something else.

You Need Equipment that Gets Updated Frequently 

Office furniture can often be used for many years or even decades. However, this isn’t the case for some other types of equipment. Electronic devices like phones, tablets, and laptops need to be replaced once every three to five years due to technological advances and software updates. Keeping a computer for too long causes security issues and expensive repairs, and it slows down workers.

Software and certain industry-specific items need to be updated even more frequently. When you buy them outright, you’ll have to spend a lot of money every year. Sometimes, you might not be able to afford the newest version due to temporary cash flow problems. Office equipment leasing allows you to spread out the cost of these items. You can get shorter leases with 12-24-month terms, so you aren’t stuck with an outdated piece of equipment.

You’re Not Sure Whether You Want to Buy Your Equipment 

When you buy an expensive piece of equipment, you’re stuck with it even if you later notice that it isn’t suitable for your business. You have to either keep using the item or try to sell it to another company. Because second-hand goods are usually much cheaper than new ones, you might only get 50% or less of your money back.

Leasing is the most economical choice if you’re not sure whether a certain item is right for your business. It allows you to try the piece of equipment for a few months or a year. If it doesn’t work well, you can give it back and select something different, but if it was what you were looking for, you can purchase it from the leasing company.

How Does Leasing Work? 

Taking out a lease is very easy, especially when you work with a reputable provider like Noreast Capital. Start by putting together a list of all the items you need. Then, compile your financial information, and make sure you have the details of your company at hand.

When you contact us online or via the phone, tell us as much as you can about your business. If you’re looking to buy items worth a few thousand dollars, we’ll get back to you within 24 hours.

What Equipment Can Be Leased?

Almost any kind of office equipment can be leased. At Noreast Capital, we can help you find furniture, industry-specific items, electronic gadgets, security equipment, and software. We offer products from various vendors and providers, so you’ll have lots of choices when you work with us.

What Types of Leases Are There?  

There are countless types of leases. One of the most common models is the capital lease, which allows you to buy the item for a token sum once the term is up. This is very similar to a loan. If you’re not sure whether you’d like to buy the equipment yet, a more flexible lease might be better. The 10% security plan offers low monthly payments, so it’s an attractive option for business owners with enough financial resources to pay a security deposit.

People with very specific needs can get a lease tailored to their individual situation. For example, owners who run a seasonal business can pay more during busy periods and less during slow months. Those running a startup can delay payments for a few months until they have picked up some customers.

Is My Business Eligible? 

Most businesses are eligible for a lease, but just like banks and private lenders, lessors will check each company’s financial documents before issuing credit. If you’re an established business, you might be asked for bank and trade references and financial statements. New business owners need to provide a business plan, a personal guarantee, supplier contracts, and pro forma financial statements.

Office equipment leasing is a great solution for businesses that need to remain flexible, want to expand quickly, or are just getting started. Get in touch with us at Noreast Capital to find out more about the types of leases we offer and how they could help you grow your business. We can lend you office equipment, furniture, industry-specific items, heavy machinery, and even software.

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