Often the equipment is a significant investment for a business owner. As a tangible asset, these expenditures may be financed. When businesses identify the equipment they need to operate, equipment leasing allows the business to secure the equipment without cash outlay of buying the equipment up front.
Many equipment leasing companies desire to fund new purchases of equipment. However other leasing companies are open to funding used equipment as long as the market value of the equipment can be readily established. Equipment leasing offers the business owner the ability to spread out the cost of the equipment over an extended period of time which reduces the monthly cost of a lease.
There are different types of leases much of which may depend on the asset being acquired. Some leases transfer clear ownership at the end of the lease term for $1. Others lease project a market value at the end of the lease term. At that point, the business may have a choice to purchase the asset at the end of the lease or simply terminate the lease. Equipment leases are used by companies to avoid the cash outlay (or balance sheet debt) associated with acquisition of equipment for business uses.