When It Comes to Business Equipment, Is It Better to Buy or Lease?
BY: Jeff Schleis
If your business needs expensive or specialized equipment like machinery, fleet vehicles, heavy duty trucks, or high-end computers, you may be wondering how to finance these purchases.
While leasing is a common option for vehicles and buildings, it is becoming a more frequent choice for other big business expenditures, as well.
Did you know you can get lease terms for almost anything through your bank?
Let’s consider some factors that might influence your decision to either buy or lease. Start by asking yourself:
- How long do you plan to keep this particular asset?
- How often will you need to upgrade to keep pace with industry advancements?
- Are there tax benefits associated with certain financing options?
- Do you have cash on hand for a down payment?
- Is there a market for selling a used asset when it no longer serves your needs?
- Can you effectively manage maintenance costs and upkeep?
Benefits of Buying
There are a lot of benefits to buying what you need to operate your business effectively. It tends to be a more straightforward process with multiple easy options for financing, if needed. Your purchase becomes an asset versus just an expense, helping to build up equity in your company and enabling the possibility for deductions and depreciation write offs on your corporate taxes. If you have an in-house maintenance program established, you can likely limit the cost of upkeep and control the timeline based on your usage. And finally, you may be able to sell off used pieces of heavy equipment, trucks, or vehicles to recoup some of the original purchase price and help fund the next upgrade.
Leverage Your Leasing Options
Leasing also brings a lot of benefits you may not have considered. For example, you usually don’t have to pay anything up front, so you can get what you need even without a down payment. If your business requires the most modern equipment or technology, it tends to be more expensive. Leasing can make your monthly budget go further, often enabling you to acquire technology you might not have been able to afford otherwise. Finally, leased equipment is usually serviced by the owner, making it easier to maintain high-end equipment you might not have the expertise or budget to fix or replace if something goes wrong.
The Right Choice for You
As with most decisions, there is no one perfectly right answer. Either financing method brings its own set of pros and cons. Tap into your trusted team of advisors to understand how each option may affect cash flow, potential resale value, and the full spectrum of tax implications. Furthermore, consider how this addition might impact your business and provide a greater return on investment.