No Built in Equity
In addition to paying the higher cost, you are not able to build any equity in the business equipment you have leased. This is because you are not the owner of the business equipment. This is a very big disadvantage of leasing business equipments. This lack of ownership is also responsible for the increase in the overall cost of the business equipments, because you also pay to the lesser for carrying the risk of the ownership with him. Moreover, the payments for insurance charges and taxes, further increases the cost of acquiring the business equipment.
High Early Cancellation Charges
One more disadvantage of leasing business equipments is that irrespective of the fact whether you are using the business equipment or not you need to pay for the total term of the lease. In some cases, you may get the facility of lease cancellation if you do not need the leased business equipments any more. However, this is at the cost of very high early termination fees.
It is also possible that IRS do not accept the leasing of business equipments as purchases for the tax benefits. In that case it will be a great disadvantage. In the beginning, when we lease business equipments that we require immediately for the growth of the business, it looks beneficial for us. However, in the long-term there are several disadvantages of leasing business equipments. During the term of the lease, you pay not only for the cost of the business equipment, but also for the charges of the leasing company. Even, after the end of the lease term, you are required to make rental payments for using the business equipments.
Cost of Maintenance
Not owning the leased business equipments does not save you from the onus of maintaining it. If your staff is not capable of repairing, then it may become a very costly affair in case of serious fault.