Medical equipment leasing has become a viable way for hospitals and small clinics alike to obtain the supplies they need to run a successful practice. According to GlobeNewswire, the global healthcare equipment leasing market could reach $59.8 billion by 2027.
As a medical equipment manufacturer or distributor, offering leasing options to your customers can be a strategic move for numerous reasons. Today, we’ll cover the fundamentals of medical equipment leasing: what it is, how it works, and why so many organizations (your potential customers) often prefer leasing over buying.
Quick Takeaways:
- As a medical supplier, offering leasing options to your customers can be a strategic move.
- Leasing is a practical and fiscally responsible way to keep a facility up to date with the latest technology and equipment.
- When helping your clients decide whether to buy or lease medical equipment, help them consider their business model, credit score, technology needs, and maintenance requirements.
- Top benefits of medical equipment leasing include lower upfront costs, greater flexibility, an easy application process, and the ability to upgrade quickly in a rapidly changing environment.
What is Medical Equipment Leasing, and How Does it Work?
Leasing is like renting. Hospitals, for example, can lease the medical equipment they need to care for patients by making monthly payments. At the end of the lease, they can decide to purchase, continue leasing, or return the equipment.
Leasing payments are often lower than buying, and the terms are more flexible. A standard lease term for medical devices ranges from three to five years. Leasing is a practical and fiscally responsible way to keep a facility up to date with the latest technology and equipment.
Is it Better to Lease or Buy Medical Supplies?
When helping your clients think through whether they should lease or buy medical equipment for their facilities, help them consider the following factors:
- Their business: Smaller businesses, like urgent care and doctor’s offices, can save a lot of money by leasing rather than buying equipment outright. Some lessors also allow lessees to make payments toward the overall cost, giving businesses the option of purchasing the product when the lease ends.
- Their credit: Credit history can significantly impact equipment lease prices. Businesses with higher credit scores will have lower interest rates and pay less over the life of the lease than those with low credit scores.
- Technology demands: Businesses should consider how quickly the equipment in their specific field becomes outdated. Supplies and technology that evolve rapidly may not be worth purchasing outright since they will need to replace them soon.
- Maintenance requirements: Businesses that want to customize their equipment may prefer buying over leasing. They will have more control over maintenance, updates, and turnaround times for repairs if they own their supplies. If a company leases, they will have to rely on the lessor to make repairs, and modifications may be prohibited.
Top Benefits of Leasing Instead of Buying Medical Equipment
Here are some of the top advantages of leasing medical equipment. You can use this information as an outline when speaking with clients or prospective clients about leasing versus buying your equipment.
1. Fewer Upfront Costs
Sometimes, large purchases aren’t an option due to the high initial cash outlay. Borrowing money (taking out a loan) and making the initial down-payment can also be out of reach for many businesses.
Rather than forking over a massive payment upfront, businesses that lease their equipment can make affordable monthly payments that don’t break the bank. Down payments are rarely required for leases (or are low-cost), giving organizations the equipment they need immediately without grossly impacting their cash flow.
Inform your clients that over time, depending on how long they lease the equipment, they may end up paying more overall than they would have if they’d bought it outright. Encourage your leasing clients to select an end-of-term option that fits their practice’s needs. If they can avoid renewing rental payments past the point where their lease exceeds the cost of directly purchasing the equipment, they can save money in the long run.
2. Flexibility
Compared to taking out a loan to purchase medical equipment, leases are easier to acquire, even for companies with poor credit or those that require an extended payment plan for lower monthly costs.
Lessees also have various options to consider at the end of the lease term. They can choose to renew the lease, extend the contract, purchase the equipment, or end the lease and upgrade to new equipment.
3. Speedy Application Process
Getting approved for and executing a lease can be a fast and straightforward process, as long as the lessee provides the correct financial information up front.
4. Tax-Deductible
Organizations can deduct lease payments as business expenses on tax returns, further reducing the net cost of their investments.
5. Easy to Upgrade and Keep Up with Rapid Changes in the Medical Field
As the medical field continues to advance, hospitals and other healthcare organizations must continually replace outdated technology and systems. High-tech equipment can quickly become obsolete.
Leasing offers medical facilities greater flexibility than buying and the advantage of not having to try to unload old equipment. Instead, they can easily replace it with cutting-edge supplies and high-end technology to meet emerging patient needs.
Owning medical equipment can be advantageous for many larger organizations, but the benefits don’t always outweigh the costs. If a new rendition replaces an older model earlier than expected or before the business has paid off its previous loan, it could get into financial trouble. Additionally, the older model may have a low resale value and be difficult to sell.
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