5 Ways Manufacturing Companies Can Benefit from Equipment Leasing

From 3D printers to excavators, equipment often represents a major capital investment for manufacturers. Specialized machinery and tools carry high price tags. Many pieces of equipment rely on technology and components, and incorporate robotics and other automation features. The heavy equipment used in some industries – advanced including agriculture, transportation and construction – can be particularly expensive.

While purchasing equipment outright is a good option in some situations, leasing can offer clear advantages to manufacturers. Here, we look at five equipment lease benefits for manufacturers.

1. Preserves cash. While purchasing can sometimes be less expensive in the long term, leasing preserves cash in the short term. Leasing generally requires only a minimal initial investment, followed by predictable monthly payments for which you can reliably budget. With no large upfront capital outlay, costs are spread over time, allowing you to keep more cash on hand for operations and growth.
2. Allows businesses to stay current with technology. Many manufacturers need equipment that incorporates up-to-date technology. Leasing removes the issue of being left with outdated equipment. When technology advances, you are able to update with newer equipment when your lease expires. In effect, your equipment never becomes obsolete because you can get the newest technology when your lease expires.
3. Eliminates worries about maintenance and repairs. When you lease, the lessor typically assumes responsibility for maintenance and repairs. This eliminates unexpected expenses in the event of an equipment malfunction or breakdown, and reduces your need to maintain a large emergency fund for that purpose. You’ll also be able to more clearly focus your time and talent on your core business. As the lessee, the responsibility you will maintain responsibility to abide by the terms in the agreement, scheduling routine maintenance as appropriate.
4. Increases flexibility. Whether it’s due to technology, client needs, business growth, the market or other factors, chances are good that your equipment needs will grow and change over time. When you lease manufacturing equipment, you gain the ability to add, subtract or update equipment as needed.
5. Can provide additional financial benefits. While every situation is different, lease payments in the both the United States and Canada may be tax-deductible as operational expenses. In addition, depending on their structure, leases may not appear as liabilities on a balance sheet. This can be advantageous in keeping debt-to-equity and leverage ratios lower, which may result in easier, or less-expensive, borrowing when that need arises.

Each manufacturer must carefully evaluate their options, their finances and their goals in making the decision to lease or buy equipment. For some companies and some equipment, purchasing makes sense. But manufacturing equipment leasing offers an excellent option with significant benefits ranging from cash conservation to ease of updating equipment.

Mitsubishi HC Capital America is a leading independent equipment finance company with a specialty in manufacturing. Working with businesses throughout North America – including those in the transportation, transportation, agriculture and clean-tech industries – the company designs and implements customized financial solutions that support business expansion and growth. Contact us to see how we can help you evaluate your leasing and other equipment financing needs.