Depending on your relationship with leasing companies, you can run into two situations:
While we hope you have great experiences with leasing companies, the fact still remains that those who’ve had good experiences can still be faced with complications.
Companies are left with three options at the end of their lease: renew, upgrade, or buy out. Whether you have been dealing with the leasing company for a long time or this is your first time, chances are likely you’ll have these same options and each one of these has their pros and cons.
By no means is there a right or wrong answer, but this article is here to help you consider what happens in these situations.
If you are reading this around the time your lease is coming up, chances are you’ve been approached by a representative who’ll start discussing your options. If you’ve been happy with what you have and you like working with this company, renewing your lease can seem like a no brainer:
You also might feel compelled to keep it if the company you’re dealing with can easily repair your equipment. Not only is that a reason to stick with them but also keep that same equipment. Knowing that if your equipment breaks down it can get fixed quickly and with little issues can be reassuring.
But despite that logic, there are some downsides to renewing and keeping things as is:
Make sure you ask the leasing rep about what’ll happen in those situations.
If the downsides I’ve described make you paranoid about the future, one way you can hedge your bets is through upgrading. Sure there is the procedure of moving equipment, but getting something new can be exciting too:
But while these are great reasons to consider upgrading in the first place, there are downsides to consider:
Even if you are sticking with the company and you’re technically returning the equipment for something new, there is still a process in place. There is also a process if you plan to deal with a new company as well.
The final option is to buy out the equipment that you’ve been leasing. Every contract will likely have buyout terms, but the terms themselves will vary. If you’ve been dealing with the leasing company for a long time, they may offer some softer buyout terms than when they drew up the lease. But in most cases, your buy out price will be the fair market value.
Buying out an item is a bigger decision as it’s a shift in ownership which can mean a lot of perks and drawbacks.
The biggest advantage from buying out is that you own the equipment. This means you can do whatever you want with it like lease it yourself, or sell it.
Another advantage – you no longer have to make lease payments. Sure you probably paid the fair market value of the equipment and it made a huge dent in your funds, but that’s it. After that payment, you have no requirement to sink monthly lease costs into the equipment.
Overall, this will boost monthly cash flow and can allow you to invest that freed-up cash into other areas.
But as mentioned before, there are some costs to it that could discourage companies from this option:
Each option one has its own distinct advantages and disadvantages. The question now is how will these match up with your overall company? Again, there are no right or wrong answers, but make sure you consider your options carefully.