Seven Reasons to Lease Manufacturing Equipment

You’ve decided it’s time to purchase some processing equipment. That’s the easy part. Now you’ve got to wade through all your possible payment options. Who knew there could be so many? One of these payment methods, which you might at first glance reject offhandedly, may actually be the best option for your manufacturing facility. Read on to learn why leasing manufacturing equipment might be better than immediately buying it outright.

1. Budgeting – Because leasing equipment involves a fixed payment, you’ll know exactly how much your expense will be every month. Armed with that knowledge, you can quickly calculate how much you’ll be paying for the entire year. That way, you can punch in a few numbers to determine if you’ll have the funds to cover another business expense days, weeks or months in advance of accounting’s closure of the books.
   
   
2. Upgrading – If your manufacturing process requires (or even just prefers) state-of-the-art equipment, then leasing allows you to much more easily upgrade every couple of years. With leasing there’s no need to find a buyer for your old manufacturing equipment before you can purchase new equipment. Simply trade it in for a newer model and start the leasing process all over again.
   
   
3. Financing – Typically the leasing of manufacturing equipment does not require a down payment. Therefore, manufacturers can lease the expensive equipment they need to keep their operations running smoothly even when they are experiencing a cash crunch. This benefit is especially advantageous for new manufacturing facilities who need to get their businesses up and running quickly but may not have the initial capital to make that happen.
   
   
4. Tax Advantages – When you lease equipment, there is no need to depreciate it using complicated tax formulas. In most situations, the entire amount of your lease payment can be deducted as a business expense. Please consult with a tax professional to see if leasing can improve your tax situation.
   
   
5. Access to Capital Equipment Specialists – The individuals who lease manufacturing equipment are experts in the ins and outs of leasing. They can help you not only secure the right machinery but also come up with an equipment financing plan that’s right for your manufacturing facility.
   
   
6. Keeping Credit Lines Open – Even the biggest manufacturers have access to only a limited line of credit at their banks. And smaller facilities are usually even more strapped when it comes to credit access. Oftentimes, much of the credit they do have goes toward mortgage payments on their manufacturing facility, leaving little for other important purchases like manufacturing equipment. Leasing machinery doesn’t eat up any of your available credit.
   
   
7. Improving Purchasing Power – Traditional loans usually require that all sales taxes on purchases of manufacturing equipment be paid up front. In Chicago, Illinois, for instance, where the total tax rate is 9.5%, a manufacturer with a $20,000 equipment budget could actually only purchase machinery costing $18,265. The difference of $1,735 would go toward taxes. By leasing instead, the full $20,000 could go toward the necessary manufacturing equipment. Therefore, leasing gives you more bang for your buck.

There are many advantages to leasing your next piece of used manufacturing equipment. Once the leasing decision has been made, Aaron Equipment can help you obtain financing for a single piece of equipment or an entire manufacturing line. Click to learn more about Aaron Equipment’s leasing partner for manufacturing equipment.