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What Is Equipment Leasing?

Farmers might lease farm equipment.
Office equipment, such as copiers, may be available to lease.
Computers, desks and chairs can be obtained on a leased basis.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 13 November 2014
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Equipment leasing is the processing of securing the use of computers, machinery and other types of equipment by way of a rental agreement. By entering into a contract to utilize equipment for a specified period of time, a business or individual can enjoy the benefits of usage without the responsibility of ownership. Entering into an equipment-related lease is especially helpful when the need for a given piece of equipment is only temporary.

Many industries make use of equipment leasing. In some instances, choosing to lease necessary machinery and other components is an ideal situation for a new business or an established business with very little working capital. Rather than investing large amount of limited resources, leasing necessary components makes it possible to secure more up to date equipment and focus on the task of growing the business.

There are other advantages associated with business or office equipment leasing. One has to do with the paying of taxes. Since the equipment is only leased and not the property of the entity in possession of the computers or other machinery, the business is not liable for taxes on the items. This can help to keep taxes owed to a minimum, freeing up more revenue to invest in some aspect of expanding the business.

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Equipment leasing is also an easy way to gain access to the latest copy machines, fax machines and many other types of equipment. Many rental agreements include provisions that allow older equipment to be exchanged for newer versions, if both parties agree to the exchange. This option can be extremely helpful when a business outgrows the capabilities of an older piece of rental equipment and requires something more robust to keep up with company growth.

One other advantage connected with office or business equipment leasing is the easy replacement in the event of a malfunction. In general, an equipment leasing company will schedule regular maintenance of rented machinery as part of the basic leasing contract. However, should the machinery fail and it is not possible to manage repairs on site, the leasing company usually will deliver a replacement at no extra cost to the renter. This benefit means that there is a minimum of productivity lost due to the breakdown.

There are other forms of equipment leasing that are not related to general office machines. It is possible to lease heavy farm equipment as well as engage in medical equipment leasing. In all agreements of this type, both parties agree to the terms and conditions specified in the contract, and are bound by those terms for the duration of the agreement. However, the original leasing agreement can be rolled into a new contract if both parties agree to the change.

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Discuss this Article

Leaseq1
Post 4

You really have a great post here. An equipment leasing option can be extremely helpful when a business outgrows the capabilities of an older piece of rental equipment and requires something more robust to keep up with company growth.

write79
Post 3

I didn't like the idea of leasing the equipment I'm going to need for my new business. I didn't want to have more stuff that I had to keep making payments on.

However, if these equipment leasing agreements can include things like maintanence on the equipment, or new equipment in the event of a breakdown, it sounds like it might be a great idea.

heath925
Post 2

How much are the taxes that a business has to pay on it's equipment? I can understand why leasing the equipment would be an attractive option, in order to avoid having to pay those taxes. But couldn't you end up paying more than the equipment is worth and more than the taxes if you have to keep on making lease payments?

Unless equipment leasing rates are extremely low, it seems to me like leasing the equipment could end up costing more in the long run.

anon84215
Post 1

When a new corporation leases equipment that is used daily with an option to buy (2-5 years), how is this handled on the company books? thanks

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