Meta Description: Expanding or starting up a small business may be challenging; hence, the most critical decision you have to make is whether to purchase or lease equipment.
When shopping for your business equipment, one of your trickiest questions will be whether to lease or buy. Usually, buying can be cheaper over the asset`s life, while leasing requires less money upfront, saving much strain on your cash flow.
Additionally, buying will allow you to alter or sell your machinery. On the other hand, leasing will give you multiple options to keep up-to-date with the most recent cutting-edge gear. Ultimately, it all comes down to what will work well for your long-term and short-term goals and your value as an entrepreneur.
Again, leasing is an excellent solution to your economic limitations. You may not have enough cash and must choose quantity over quality. Moreover, by leasing, you will get both quantity and quality. Hence, leasing creates room for growth since you get exactly what you want. Comparatively, let’s take a look at the advantages of leasing versus Financing.
Advantages of equipment leasing Versus Financing
- Tax deductible: Lease payments are deductible on a tax return as your business expense, reducing your lease`s net cost.
- Less initial expense: The essential advantage of leasing versus financing a piece of business equipment is the fact that you can acquire assets with little initial expenditures. And because equipment leases don’t need a down payment, getting the goods you require is easy without affecting your money.
- Flexible terms: A lease is usually easier to get and has flexible terms than financing to buy equipment.
- Easier to upgrade the equipment: Leasing permits businesses to address the issue of obsolescence. For instance, if you lease items that will become outdated shortly, like high-tech equipment or computers, then the obsolescence burden is passed onto the lessor by the lease. Thus, you can lease brand-new higher-end equipment once your lease expires.
Advantages of Equipment Financing
- Ownership: The significant advantage of purchasing business equipment is owning it. This is especially if the item has a long working life and will not be technologically outdated, such as farm machinery or office furniture.
- Reduction of depreciation: Though not every equipment purchase is entitled to section 179 coverage, you may still get tax savings for any business equipment via depreciation deductions.
Which option is best for your business when deciding on leasing versus Financing? The first thing to figure out is the approximate cost of the asset. Also, consider resale value and tax breaks when making your calculations.
After you develop a cost-effective option, consider other intangibles like the possibility of the item becoming obsolete in case you consider purchasing. Or that the need for the thing may expire before your lease does in case you`ve considered leasing.
Bottom line, leasing versus Financing, the ball is in your court to decide which option is best for your business. I’m positive this write-up has shed some light on both options. Whichever you choose, you can always reach out to us for support and facilitation