Businesses Wrongly Skimping on Equipment Investment
More and more businesses may be exploring different types of equipment leases in the days ahead.
Economists at Morgan Stanley recently said the average age of industrial equipment in the U.S. has reached 10-plus years – the highest level since 1938, reported The Wall Street Journal.
This comes at a time when companies are spending more on acquisitions and stock buybacks. The Wall Street Journal quoted data from Dealogic showing that U.S.-based industrial firms spent $80.7 billion on acquisitions during the first half of 2014. This represents a rise from $69.5 billion during the same time in 2013, as well as the highest level since 1999.
Meanwhile, equipment purchases are falling by the wayside. The Association for Manufacturing Technology has stated that U.S. orders for machine tools and other equipment used to shape metals and other raw materials were down by 2.7 percent from the previous year, The Wall Street Journal continued.
“Waiting for business investment to accelerate has been a painful and thankless exercise,” Reuters quoted the Morgan Stanley report as saying. “A close examination of this underinvestment paints a grim picture of productivity rates and the economy’s trend growth potential.”
As businesses of all sizes know too well, the right equipment is vital to success. However, if buying new equipment is not on the agenda, it might make sense to explore equipment leasing options.
The right tools for the right price
Many small businesses across the country have discovered that you don’ t have to spend much-needed capital on equipment in order to give your business an edge. Simply leasing the equipment can give you the tools you need while also allowing you to preserve vital cash.
Equipment leasing comes with other significant benefits you may not be aware of. For example, the tax advantages of leasing equipment under Section 179 include being able to write off equipment lease payments up to 100 percent. This is because payments are considered an operating expense of your business.
Additionally, the depreciation of equipment can be expensed 100 percent during the term of your lease, instead of throughout the life of the equipment if you had purchased it outright.
It’s clear that many businesses are skimping on their equipment needs, something that can come back to haunt organizations all too quickly. Fortunately, equipment leasing provides the ideal solution for getting what you need at the right price.