Leasing and Financing: The Difference

Leasing and financing are the two methods by which most people purchase an equipment for their business. Both involve making monthly payments, and in both cases, an outside company has a stake in the equipment. This means that they have an interest in protecting that equipment, and it does relate to how it is insured.

Leasing and financing are both a way of getting the equipment whether it is a truck or crane or any other equipment you need for your business on a monthly payment plan.

The main difference is that with financing, you are taking out a loan in order to purchase the equipment, and making payments to the financial institution that provided you with the loan, along with interest.

Eventually, unless you sell the equipment, you will have the loan paid off and own the equipment outright. Even while paying off the loan, any value of the in equipment belongs to you after the loan amount is paid off.

With a lease, you do not own the equipment and are not paying it off. You are paying a monthly fee to a leasing company for the privilege of using the equipment for your business.

Most leases have the option to purchase the equipment when the lease term is completed if you want to do so. A lease usually comes with certain terms.