When selecting for equipment, the decision depends on the situation whether you should buy it or lease it. While leasing can be a good option for owners who have limited finance allocation or needs equipment that you can upgrade every few years or until the term ends; buying your own equipment can be a better option for established businesses or in need of equipment that has a long-term shelf life. With Strongbox, you can have both options as you may rent and buy it if you wish after the term ends for a good cost. Here is a guide whether you should buy it or lease it.
Leasing equipment and tools for business provide owners with flexibility and preserves capital, but it may also cost more in the long run.
Advantages of Leasing
- You have a less initial expense. The advantage of leasing equipment is that it allows you to get assets with less initial expenditures. Since equipment leasing doesn’t need a down payment, you can get the goods you need without affecting your cash flow.
- An equipment lease is tax deductible. Since payments for equipment can usually get deducted as business payments on your tax return reducing the net cost of your lease, it creates a good deal.
- Equipment leasing provides flexible terms. Leases have more flexible terms than loans for buying equipment plus it is also easier to get. This is an advantage especially if you have bad credit or you still need to negotiate a longer payment plan to lower your costs.
- It is easier to upgrade equipment. With leasing, the problem or obsolescence is being addressed by the business. You can then lease for new, higher-end equipment after your term expires.
What makes buying a business equipment appealing is the ownership and tax breaks, but it is not a potion for everyone since it comes along with high initial costs.
Advantages of Buying
- This is an obvious advantage when you buy equipment, this is beneficial especially when the equipment has a long useful life and will not become outdated sooner.
- Tax incentives. You can get tax incentives depending on the company you will buy the equipment for your business needs.
- Possibility of depreciation deduction. Although not all equipment purchases are eligible for this treatment, with buying your own equipment, you still have the chance to receive tax savings for almost any business equipment through depreciation deductions.
Should You Buy or Lease?
Figure out the approximate net cost of a certain asset before deciding whether to buy or lease equipment, consider also the possibility of the product to be obsolete or if your need for a product will expire before your term does.