Purchase vs. Leasing

 

Lease Vs Buy Img

 

For business owners who need certain equipment to operate, there is a lot to consider. Beyond simply weighing the overall costs of purchasing or leasing a piece of equipment, you also need to consider maintenance, depreciation, flexibility and more. 

When you start narrowing down on the type of cleaning machine your business needs, it’s a good idea to thoroughly consider the pros and cons of leasing versus purchasing. In certain circumstances, the cost-benefit of one option may strongly outweigh the other.

Leasing

Pros:

  • This method is good for equipment that needs to be updated often because you can acquire updated technology easier and quicker. If you will need to update your equipment on an annual basis to remain competitive, leasing allows you to avoid being stuck with outdated equipment.
  • There is less expense up-front with leasing because you have lower, scheduled payments. You don’t have to deal with one large lump sum to purchase what you need, making it easier to budget for the equipment over a longer period of time.
  • Leasing is flexible and offers more options when it comes to the type of equipment you get. You aren’t as restricted by high up-front costs or other concerns to try something new that may help your business.
  • With leasing, you don’t pay for maintenance. If the machine breaks down, the costs for repairs are usually included in your monthly payment.

Cons:

  • You usually pay higher costs over time than you would if you paid up-front. Most leasing options require interest to be paid as well.
  • Since you don’t own the equipment, it gives you absolutely no equity. You won’t have the option to sell the equipment once you are finished with it, so there is no potential to make any money back.
  • The available length of lease terms may be longer than you need. Strict agreements may force you to pay for and keep a piece of equipment for a longer time frame than you require, resulting in wasted funds and space. This can be especially difficult for larger pieces of equipment that you need for a short period of time but don’t have storage space for.
  • Availability of products may be limited depending on the stock of the leasing company. Your choice of brands or models could potentially be out of stock or not carried at all, so you could have to settle for something else.

Purchasing

Pros:

  • You will own the equipment, so you can make any alterations necessary. Maintenance is also in your hands, you can choose to take out a separate maintenance contract or pay for any repairs as and when needed.
  • You have the option to sell the equipment when you are finished with it, allowing you to recover some of the cost.
  • Purchasing is easier because you don’t have to deal with agreements and contracts. You simply pick out what you need and pay for it. This works well for smaller equipment that is easy to store, as well as equipment that has a long life.
  • You have complete control over what you get because you aren’t limited by a leasing company’s stock. If you want a particular model or brand, you have the ability to order exactly what you need.

Cons:

  • You will have a higher initial cost as opposed to lower monthly payments that may be easier to budget. It may be difficult to pay for costly equipment all at once. Higher initial costs may keep you from purchasing exactly what you want and may force you to settle for a lower-cost option.
  • For a technology that is outdated quickly, you are stuck with it because you own it. You then have to decide if it is worth it to continue to use it, repair it, store it or sell it.
  • You are responsible for all maintenance, including costs. This can become expensive, depending on what issues you encounter, and repairs are not always simple. You could potentially be burdened with broken equipment that you can’t return or sell. Keep an eye on the product warranty to see if it covers repairs and for how long.

Determining costs for equipment through either method should include considerations of tax deductions and/or the potential resale value. Consider the potential revenue derived from using this equipment, how quickly the equipment will be outdated, the size of the equipment and the overall costs. Each decision regarding equipment leasing or purchasing should be made carefully to best fit your company’s situation and needs.

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