Equipment Leasing: Your Questions Answered
Should you lease equipment or are you better off paying cash?
Keeping your salon ahead of the competition by refreshing equipment regularly is a key factor in customer retention and growth. Leasing allows you to pay for equipment out of the income your business generates, and so can play a key role in your ongoing strategy to keep ahead of the pack. Turn your dream salon into a reality with affordable leasing!
Let the equipment pay for itself
Leasing allows you to pay for the asset with the cash that it generates. Therefore, rather than tying up large chunks of money in purchasing equipment outright, you can keep that money for unexpected costs, and it remains on your balance sheet as working capital!!
What is a lease?
A lease is a rental contract between you, the customer who chooses and uses the equipment, and a leasing company, which buys and owns the equipment. Many businesses and organisations use leasing, from beauty salons and spas to business offices and government bodies.
Am I not simply better off paying cash?
Not necessarily. Your cash may be utilised more effectively elsewhere in the business. Leasing helps you retain capital rather than tying it up in equipment that continually loses value. This allows you to acquire the quality and quantity of equipment that's exactly right for your business, without being constrained by the capital available and with minimum disruption to cash flow. A good rule of thumb is to pay cash for things that appreciate in value and then lease what depreciates.
What are the tax benefits?
Lease payments are normally treated as a tax deductible operating expense, which may help reduce your tax bill.
Shouldn't I just go to my bank for the money?
Possibly, but leasing helps you preserve your credit lines with the bank, which may be useful as a contingency later. Bank facilities are generally repayable on demand and could be withdrawn if times get tough. Often, bank services are secured against other assets too. So it's not always wise to extend your bank borrowing in this way.
What if interest rates change?
Leasing is fixed rate, so interest rate hikes don't change the payments. They remain constant throughout the lease, allowing you to budget accurately.
What about the VAT?
VAT is charged on each of your rentals as it falls due.
How long should the agreement be?
The average lease period is 36 months.
How long does leasing take to set up and what information is required?
The leasing company will decide within 48 hours and the leasing will be completed as soon as
they receive the agreement forms signed by the customer.
What are the up-front costs?
The first rental payment plus a set up fee.
What happens at the end of a lease agreement?
Technically there are a number of options, including handing the equipment back, but this is rare. Most customers will want to keep the equipment, with one additional payment after the end of the lease. If you want to trade up, this is also possible.
Can a lease agreement be settled early?
Yes, but you will be required to pay the future payments less an early settlement rebate.
Leasing only available in the UK.