If you are a rookie in the export-import business and you are facing the dilemma of whether to buy containers or simply just lease them, we might be able to help you. This question can be a tad perplexing and you might find deciding on one of them a little tricky! Need not worry, we will help you to understand what decision will benefit you the most and aid in the success of your business.
Since there is no definitive answer, it is subject to the choices you make as per your needs. For instance, few prefer to buy shipping containers as they consider it as the most cost-effective option considering the long term scenario. Whereas other people carry shipments for electronics and big-ticket items or those who have a short term usage (maybe a couple of months) then the feasible option for them is to lease shipping containers.
Following factors are generally considered while reaching a final decision:
• Cash flow
• Managing expenses
• Cost-effectiveness
• Inventory
• Long term advantages and repercussions
• Storage needs
Now let us weigh down the differences between buying a shipping container and leasing one.
Leasing Shipping containers
When a businessman opts to rent a storage unit for a specified time frame, or when a businessman puts his shipping containers for lease by other shippers to rent them, that is known as leasing a shipping container.
Leasing a storage unit offers a variety of benefits but it also has a few drawbacks. So, it’s better to carefully consider what’s best for one’s business.
Pros of Leasing:
• One of the major advantages of leasing a storage unit is its cost-effectiveness. As leasing does not require a large sum of capital investment in the initial stages and does not force a shipper to use valuable credit, one gets to earn money without disturbing healthy cash reserves and simultaneously saving one’s credits. In case one’s business is not yet making profits, the risk of losing depreciation credit on taxes is non-existent as they can’t claim it yet anyway.
• The easy budgeting option offered by leasing is appreciated by many shippers. For example, as you lease a set, the monthly payment amount for the allotted number of months can be fixed as per the pre-determined lease terms. (Just in case to be 100% certain, get a consult from your accountant)
• A tax break can be availed as the lease payments are considered as a business expense only. (again, check with your accountant)
• If one’s storage needs are not long-term, then leasing might seem like the only feasible option here. For instance, if the lease amount for a shipping container is 100$ to 200$ a month and you have to rent that particular container for a year. It would be economically more feasible than buying a shipping container that will cost up to 3000$- 6000$ (Cost may vary depending upon the type, quantity, and location) Thus, leasing a container can help one to save a significant amount of money.
• Leasing leaves room for upgradation to the latest technology. There is absolutely no need to worry that just as computers become obsolete after a few years when the newer versions enter the market, the older models of containers won't be an issue here since you haven't bought them.
• If you’re unsure about the duration and type of container required, leasing a container solves the immediate problem of long term commitment. This makes leasing a better and flexible option.
Cons of Leasing:
• If kept for a long time, leased equipment turn out to cost even more than the original price of that item. In case if you lease a shipping container for more than 30 months, it would cost more than it would if bought it outright.
• There is a very important drawback of leasing containers. Once you sign a legal agreement for leasing, even if your business needs some kind of change or you no longer need that storage container, you’ll still be liable to pay the monthly installments.
• Leasing may have a few guidelines and restrictions about the storage items.
Buying Shipping containers
When a businessman decides to purchase a shipping container or when a businessman puts up his shipping containers for sale for other shippers to buy them, this is known as buying a shipping container.
As with leasing, buying a shipping container may be beneficial in many ways but it also is disadvantageous in a few other ways.
Pros of Buying:
• Investing in a few containers seems like the best option from the financial point of view to avoid unwanted charges and taxes in case you need the containers for a long period.
• In case of a container rental, you’re liable to pay the delivery charge, pick-up charge, trucking charges, etc. But if you purchase one, you only have to pay the delivery fee.
• If your company requires a few storage units to stay on campus all the time, owning a container might be the best solution. And when it is required for the dual purpose of cargo transportation as well as storage, purchasing a container will be a quick and feasible option.
• You can also avail a variety of tax benefits like equipment depreciation. (Make sure to consult your accountant on this)
• Besides the fact that it allows you to save a significant sum of money in the long run it also allows you to sell the container easily in case you are no longer in need of a particular container or some container model has become outdated. Also, you are not liable for unwanted monthly payments if purchased outright.
• Unlike leasing there are no restrictions on storage items and the owner can store whatever they wish in the containers when in need of some extra space.
• It also allows for modifications and customizations of the shipping containers as per the owner’s needs.
Cons of Buying:
• In case you purchase a shipping container, you are liable for their maintenance, repair and storage costs too. Thus, adding additional expenses to your budget.
• If you are a beginner in the shipping industry or you’re facing a deficit in your business, or if you don’t have enough cash reserves or your credit is at a premium, buying shipping containers is not at all feasible.
• If you no longer need the purchased container soon after the initial purchase, selling that container would also bring minimal return as compared to earlier investment.
Hope that this article was helpful to you in addressing your concerns and helped you reach the right decision.
Comments
Post a Comment