AS a business owner you will need certain equipment – such as computers, machinery or vehicles. Not only do you have to think about selecting the right sort of equipment for your business, you also need to consider the overall costings of buying or leasing it.
When it comes to choosing between the two you need to take into account a number of things – including but not limited to your business accounting needs such as upfront costs, maintenance costs and tax implications.
Leasing equipment is a little bit like renting office space, you make monthly payments to use an asset that you do not own. Buying equipment involves investing your own money and purchasing items.
When you begin to narrow down what type of equipment you want for your business, it is a good idea to think about the pros and cons of leasing versus buying.
- The equipment will be yours, which means you can make as many alterations as necessary. Maintenance is in your hands, so you can fix problems instantly with no waiting around and at a cost that suits you – you also won’t have to wait for issues to be sorted or need to ask permission to make changes.
- You have complete control over what you can get because there are no limits from a leasing company. So if you need a particular model or make of something, you can order exactly what you want.
- You can sell the equipment when you no longer need it, allowing you to potentially make some money back.
- Buying is a lot easier because there is no need for agreements or contracts. You simply choose what you need and pay for it. This is perfect for smaller equipment that’s easy to store and equipment that has a long shelf life.
- You can alter equipment as you see fit – for example, if the castor wheels currently installed on a trolley or machinery aren’t mobile enough, you can source alternatives that meet your needs from a site such as Tente without any repercussions later.
- Your initial costs will be higher, as there will be no monthly or lower payments. Higher initial costs can keep you from buying exactly what you need upfront.
- Technology becomes outdated quickly and once you have brought it, you’re stuck with it so you will then need to decide whether to store it, sell it or updated it which will cost you money.
- You are responsible for your own maintenance costs, which means it can get pricey depending on what issues you encounter.
- Leasing is great for equipment that needs to be updated often because you can swap and change when needed with very little outlay cost.
- You have less expense upfront when it comes to leasing because the payments are easier and smaller. You won’t have to deal with a huge lump sum to buy what you need, allowing you to budget over time.
- There is no need to pay for maintenance costs if something breaks.
- You will be paying higher costs over time compared to if you paid upfront for equipment. Most leasing options have interest to be paid too.
- As you don’t own the equipment you have no equity. You cannot sell it once you’ve finished meaning you cannot get any money back.
- Leasing terms could be longer than you need and because of strict agreements you could end up being forced to keep equipment for longer than you require. This results in a waste of money.
- Availability for certain products that you need could be limited because of the stock that leasing company has.
Buying and leasing equipment offers both costs and benefits. Your cash flow is a huge consideration, as well as the length of time you will be using something. Think about all the different pros and cons and see what suits your business the best.