Should I lease or buy equipment for my business? Every aspiring entrepreneur has made this lease vs. buy decision at least once. Starting or expanding a company requires a lot of money, and business owners consider all options to save money. Leasing equipment, buildings, and vehicles are one of them. This article will explain the lease vs purchase for business aspects in detail.
Leasing Equipment vs. Buying For Your Business
Leasing can be a life-saving option for some, while it is a demanding condition for others. Leasing means that you rent an asset at an interest rate without ownership. You can return the asset or repurchase it at the end of the lease term. Here’s a look at the benefits of leasing vs buying equipment.
The advantages of leasing:
- Ability to quickly get the equipment you need
- No or cheaper initial payment
- Low-interest rate (good credit history needed)
- Flexible terms
- Lease payments are tax-deductible
- Ability to test drive the equipment before a purchase
- Free equipment maintenance and repair
- Equipment is easier to upgrade after the lease expires
The advantages of ownership:
- Cheaper asset life-cycle cost
- Opportunity to get a tax depreciation
- The item is accounted for on the company’s balance sheet
- Freedom to use the asset as you see fit
- The ability to sell, trade, or lease the asset after use
You can lease equipment, vehicles, and assets such as commercial spaces, warehouses, or offices. Why do companies lease buildings instead of buy them? This option simplifies the management of commercial space. As a businessman, you don’t have to worry about insurance or maintenance costs and can focus solely on your business.
Lease or Buy Equipment for Business: 5 Tips
Does leasing cost more than buying? The answer will depend on how often you use the equipment. Let’s say you need a car for the daily transportation of products. In addition to the cost of the vehicle itself, the leasing terms imply additional payments. These are so-called interest charges, taxes, and fees. In this case, it will be more profitable for the entrepreneur to purchase a vehicle.
Consider another example. You are a novice photographer who received an order for a complex photo shoot with a fee of $800. For this, you require an expensive light kit and an additional flash, totaling more than $2000. In this situation, it is definitely more advantageous for you to rent equipment.
For convenience, below, we have described 5 tips that will help you decide when to lease vs buy equipment:
1. Estimate how often you will use the equipment.
2. Conduct a lease vs. buy equipment analysis
3. Check how much money you have available.
4. Assess if you are ready for facility repairs and maintenance
5. Choose if you plan for gradual growth or a quick profit
Whether you lease or buy, you must provide your customers professional business documentation. Invoice Maker by Saldo Apps is a multi-tasking tool for generating, tracking, and recording invoices. Ready-made templates allow you to quickly create an invoice pdf and customize it to your needs. Add your logo and signature and get paid up to two times faster with the instant payment form. Take your business communication to the next level by providing your customers with clear and user-friendly invoices.
