Article originally appeared in the October issue of Ground Handling International.
Authored by Paul Gentile
According to the Equipment Leasing and Finance Association (ELFA), 78 percent of U.S. companies use some form of financing when acquiring equipment. As organizations’ needs are evolving, more businesses are migrating toward using assets through flexible payment solutions rather than owning them outright. This is especially true in light of the current economic climate: financing or leasing ground support equipment can enable ground handlers, airlines, and airports to preserve capital, gain access to the newest equipment and have the flexibility to support changing business and financial needs.
Why lease?
Determining whether to lease, finance or purchase equipment ultimately comes down to how well established the ground handling company is, what its needs are and the amount of risk it is prepared to accept.
While an established, stable ground handler with a longstanding vendor relationship may feel more comfortable purchasing new equipment, owning ground support equipment can generally present more financial challenges than leasing the equipment.
Making the initial purchase requires a large amount of cash up front, which ties up working capital that could have otherwise been spent on supplies, personnel or training. There are fewer upfront barriers when leasing, so that working capital is conserved; and more financial flexibility is realized from the beginning, an especially attractive option for newer ground handling companies.
When leasing, fixed monthly payments enable more accurate budgeting throughout the term and makes for easier cash flow forecasting. At the end of the term, the equipment can then be purchased, upgraded to new equipment or financing can be continued on the same unit of equipment.