By: Nathan Dube on June 30th, 2020
Packaging Machinery Buyer's Guide: Leasing VS Buying
You have been tasked with buying packaging machinery for your company, and you are stressing about how you should purchase the equipment.
You want to make the best financial decision for your company, but you haven't purchased machinery like this before. You may be asking yourself, should I buy or lease this equipment? What are the potential repercussions of each option? Which is right for my company?
OK, first of all, don't sweat it, take a deep breath, and read on...
When shopping for packaging machinery, there are many things to consider. Now that you have decided on the best machine for your application, how do you pay for it?
How can you justify purchasing the equipment for your packaging line? What is the ROI (return on investment) of buying the machinery versus leasing it?
When buying packaging machinery, it is common to either buy the machinery outright or lease the equipment. Many things come into play when trying to figure out if you should lease your packaging machinery or buy it.
Depending on your budget for machinery, materials, and routine preventative maintenance, both options could make sense. At Industrial Packaging, we've helped thousands of buyers purchase their packaging machinery and choose the right way to buy the machinery.
In this article, we will give an overview of the situations that would make buying or leasing packaging machinery right for you. We'll help you make the right decision for your company and help you to be a purchasing hero.
Buying Packaging Machinery
One option for buying packaging machinery is to buy the machinery outright with a check or company debit card.
When purchasing machinery like this, you must be sure that your budget will allow for the purchase. Packaging machinery can be expensive in some cases while being moderately priced in others.
There are several things that you will want to consider when thinking about buying packaging machinery outright.
For example, what are you packaging? Your products' size and weight will have an impact on the type of machinery that is appropriate for your particular applications.
If you are packaging small volumes of small, lightweight products, you may be able to get by with a smaller, simplified packaging line. This may only require one or two entry-level machines, which means you may only have to spend a few thousand dollars.
On the other hand, let's say you are packaging large volumes of products, or your products are large, heavy, or oddly shaped. In this situation, your products may demand multiple types of machinery and, in some cases, custom or modified machinery.
In the latter case, the machinery required for your needs can be very costly, especially if your products are oversized, oddly shaped, or ultra heavy (steel beams, for example).
Take a look at your budget and be sure that you can afford to buy the machinery required for your products. Keep in mind that you'll also need to purchase the materials you will be running on the machines as well as a preventative maintenance plan to keep the machinery running well.
If you can justify the cost with your current available funds after analyzing each of these elements, then purchasing outright may be a good decision for you.
On the other hand, if you can not justify the expenses or afford all the items you will require to operate your packaging line, you will want to consider leasing your equipment instead.
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Leasing Packaging Machinery
If you cannot afford to buy your packaging machinery outright, but still require the machinery to package your products, consider leasing the machinery as a viable option.
Leasing packaging machinery allows you to finance the total cost of the equipment and pay smaller monthly installments of the total cost over a specific period of time (usually 3-5 years in most cases).
At the end of that time frame, you will then have the option to buy the machinery based on its current market value.
However, you will also have the option of returning the equipment and rolling the remaining cost into a new lease for brand new machinery.
It should be noted that many companies will require you to have been in business for at least 3-5 years to qualify for leasing. While this is the general case for many leasing companies, some will also be willing to approve you with a personal guarantee.
What Is A Personal Guarantee?
The personal guarantee dominates any other condition required with a lease or other financial agreement. Its a personal promise that the lessee will pay for the entirety of the lease regardless of personal conditions, events, or other circumstances that may arise during the lease. Sometimes a personal guarantee requires some form of collateral.
When it comes to packaging machinery, many companies choose to lease because packaging lines can be seriously significant investments, especially if you are running multiple machines on your line.
In this respect, it's less common to see machinery 3-5 years old being returned for a new lease because many of the machines made today can last 20+ years or longer.
It is also a significant project to remove and install new machinery that often comes with unwanted downtime.
When thinking about leasing packaging machinery, you will want to work with your vendor to get quotes from a few leasing companies. Some companies will be able to get you better rates with lower monthly payments than others.
You will also have to figure out if you can afford the cost to buy the machinery at the end of the lease. If not, you may have to ask your vendor if they have any additional financing options to help you pay the remaining costs.
Should You Buy Or Lease Your Packaging Machinery?
When trying to figure out if you should buy or lease your packaging machinery, you will want to ask yourself a few questions to understand better which option is right for you. Some of these questions are:
Is ownership important to you? If so, you will want to buy outright, leased equipment does not belong to you until the remainder of the lease is paid off. Ownership may be vital if you want to own your equipment and do not want to have to deal with the end of lease options, paperwork, and other associated financial responsibilities.
Do you have a large enough budget to buy your machinery? If not, then you will want to consider leasing your packaging equipment.
Do you want to be able to finance your equipment and pay off the total cost with smaller monthly payments? If you answered yes, you are going to want to lease your packaging machinery.
Can you afford to buy your machinery outright and still have enough funds to cover materials, service, and repair costs? If you said no, you would want to lease your packaging machinery.
Do you qualify for leasing? If you have not been in business for at least three years, you may not be approved for leasing packaging machinery.
Do you want the responsibility that a lease comes with? You have to pay your lease payment every month, missing your payment date can result in sometimes serious additional fines. Automated payments are available from some leasing companies that can help alleviate this concern, but that's another thing you'd need to confirm.
With the answers to these questions, you will be better suited to decide on leasing or buying your packaging machinery.
If you are still unsure which option is best for you, consider contacting one of our packaging experts. They will be able to give you in-depth information about leasing versus buying and also give you an idea of what your costs would be for each.
They will also be able to identify current special offers on finance programs being offered that may help you get a better lease with lower monthly payments and a lower rate.
Special incentives and rebates are sometimes available for certain types of packaging machinery that you won't likely find without working with a rep.
They will also help you choose the right company, even if that means it is not us. While we would love to get your business, we would only try to gain it if we were the best fit for your unique packaging requirements.
About Nathan Dube
As the Digital Marketing Specialist at Industrial Packaging, I am honored to create content for such a phenomenal company and work with one of the greatest teams in the Packaging Industry. Whether creating a video, writing blog posts or generating other pieces of content and multimedia, I am always excited to help educate and inspire our prospects and clients to reach their highest potential in regards to their packaging processes and needs.