Is Leasing an Option for Automating Your Distribution Center?

Written By: Mark Colzani

Is leasing an option for material handling automation?Recently, I had a discussion with a friend who works with one of our integration partners, and during our discussion we came up on the topic of leasing as an option for capital equipment. For anyone who doesn’t know, capital equipment is typically a larger, higher priced item with a lifespan of more than one year. It is an asset and an investment for the company purchasing, or in this case, leasing it.

After doing a little research, I found out that leasing capital equipment is actually a very common practice for all sorts of companies, large and small. This makes sense because there are many benefits to doing so.

Being in the business of material handling automation, I can fully understand the quandary that our customers can find themselves in (being dissatisfied with not having enough automation and wanting more to continuously improve) and see how leasing is a path toward realizing an automated vision.

Some benefits of leasing capital equipment include:

  • Always having the latest technologies — Since you’re not buying a technology, you can upgrade to the latest and greatest when you are ready.
  • Saving on your taxes — Lease payments can be deducted in the current year; whereas, purchased equipment depreciates over several years.
  • Reduction in upfront cash outlay — With leasing, your company will not need to make a large upfront deposit right away, which leads to my next point.
  • An immediate automation solution — Without the need to save a large cash deposit or wait on financing, you can get the automation solution you need faster, which means you get the benefits sooner.

So…what stops a plant engineer from moving forward with leasing? Well, despite the many benefits, there are a few negatives as well.

By leasing, you can actually end up paying more for the equipment over time if you’re not careful. You have to balance the benefits of receiving the automation sooner and with less upfront costs, with keeping a leasing technology for long periods and paying more than it was worth to begin with.

Overall, you simply have to research what’s best for your company at the time, but if you need automation immediately, leasing can be a great option.

Have you ever leased capital equipment? How did it work out for you?

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2 comments

  1. I am not sure where you are getting your information, but great topic.
    I needs to spend some time learning more or understanding more.

    Thanks for great info I was looking for this info for my mission.

  2. Ken says:

    I’m not an expert in leasing equipment by any means. However I think the concept works better in some geographies versus others. Could you offer some additional perspective on the topic?

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