To Lease or to Buy?

Corey Bell

Eight out of every 10 companies in the United States lease some or all of their equipment. To determine if leasing is right for you, ask yourself:

* Should I spend the cash, or would it be better used elsewhere? Whether you purchase equipment outright or obtain a bank loan, you will need a substantial portion of your company's cash.

* What is the active life of the equipment? A lease can be structured to allow for upgrading your equipment without increasing your monthly cost.

* What can I afford? Receivables are constant and operators should know what each piece of equipment will yield. Lease or loan payments should reflect this.

* Do I need a structured payment plan? A lease payment schedule can be structured to allow for 90 days deferred or seasonal payments.

* Is the payment floating or fixed? Many bank loans have floating rates, while lease rates primarily are fixed. If interest rates are high, a floating rate may be more economical. However, if interest rates are low, it's best to lock in to a fixed payment.

* Can I afford a down payment? Leasing requires no down payment and offers flexible, extended terms.

* Does the lending source allow me to include soft costs (freight, supplies, training, etc.)?

* Is there a possibility that I will pay the loan/lease off early? A lease is a binding contract for the time stated and may carry a penalty for early payoff.