Should You Lease or Buy For Your Business?
When deciding whether to lease or buy equipment for your business, there are a wide variety of factors to consider. Ultimately, it will depend on your economic situation and which option is the most financially viable for your unique business model. There are advantages to both leasing and buying, but it is up to you to get the facts and weigh your options before you make the decision. Thoroughly understanding your need behind acquiring any new asset is essential to making the right choice when choosing between leasing or buying.
Determine Why You Need the Asset
If the asset in question is a company vehicle or equipment the is essential to the continued growth and/or success of your business, then leasing or buying may be unavoidable. The next step in determining how to acquire the asset is by asking yourself how often you will need to use the asset and what your ROI will be.
Decide Whether the Asset is Needed Short-Term or Long-Term
For example, let’s say you own a construction company and you win a bid to complete a project outside your regular range of services. If you will need specialized tools and equipment to complete the job, a short-term lease will be the smarter option for you. If you decide that you could possibly expand your services in the future and expand your reach into new markets, you can always ask about the buyout option at the end of your lease if you decide that purchasing the asset is justified.
Long-term use of the asset in your business probably means that it has become an essential part of your running a successful and well-equipped operation. This usually means that the advantages of purchasing will now outweigh the convenience of leasing or renting. Do your research, find the best deal you can, and make the largest down payment possible to minimize your monthly overhead of purchasing. You may even want to consider other business funding options if the rate is better or if you do not have time to wait for a bank approval. At Nextwave Funding, the option for small business funding can be provided within just a few days. Get the details on how an alternative funding solution can work for you.
Purchasing Used Can Cut Costs
There are a variety of situations where the equipment you need may not available for lease or the expense of leasing will prove to be unaffordable. For example, you may own a restaurant and your chairs and tables are simply worn out to the point where they must be replaced. This is an ideal situation for exploring the secondary restaurant equipment market where the items you need are available for less than 50% of retail cost.
It is important to analyze each situation, making sure to look at not only the cost, but also the profit potential versus monthly overhead. If you are new to business ownership, you should also be factoring in all your other associated startup costs to avoid over-extending your finances with equipment leases or purchases. For long-time business owners, the situation may be quite different. Having the extra capital to invest in the lease, new equipment or the purchase of equipment may not raise many red flags.
Consider the Tax Benefits Associated with Leasing or Buying
Always take the time to consult with a tax professional when deciding the options of leasing or buying new equipment for your business. Often times, leasing can provide a tax benefit in the form of a deduction on certain equipment, like software, company vehicles, and other essential tools. When buying, you have the ability to claim depreciation on certain business tools and equipment you purchase, so speak to your tax professional to determine your best course of action when deciding which route to take.