Given the current state of our economy, leasing office equipment might be a more sound financial option for businesses than taking out commercial loans. The benefits of leasing depend on the different types of leases. Here is a little bit about the two primary kinds of commercial equipment leases:
- Capital Lease – In this type of lease, both the asset and the corresponding debt are recorded on the lessee’s balance sheet. Because of this, the lessee holds all the tax benefits, with deductions for the interest part of the lease payment and depreciation expense. When the lease term ends, the lessee can either get the equipment’s title transferred to them, or have the option to by the equipment for a minimal price (i.e. one dollar).
- Operating Lease – In this kind of lease, the lessor keeps the ownership of the equipment or asset. When the term of the lease ends, the lessee can either return the piece of equipment to the lessor, or buy it at a fair market price. The lessor retains tax benefits, including depreciation of the asset and any tax credits, but these benefits may be transferred to the lessee in the form of lower lease payments.
If you decide that leasing office equipment is the best option for your business, look into these different types of leases to decide which one is a better fit!