Almost all businesses have equipment needs. They may be as basic as a copy machine, or may be much more complex, like heavy construction equipment. No matter what your equipment needs are, you will most likely be faced with a tough decision: purchase or lease?
They are many who will say that one option is always better than the other, but the truth is, the decision is much more nuanced than that. Depending on the terms and type of equipment, either leasing or buying can be a better choice for your business.
Benefits of Leasing:
1. Initial Expense: One of the biggest benefits to leasing is the lower upfront cost. Payments are regular and set, so budgeting for the expense is simple. The lower initial expense also offers more flexibility; not paying upfront means more options are available to you.
2. Maintenance: When you lease equipment, the company that you lease from is responsible for handling repairs and issues that come up from day-to-day use.
3. Quicker Updates: Many times, technology moves faster than our budgets. Leasing allows you to update equipment regularly at a much lower cost.
4. Tax Benefits: Many times, the cost of leasing equipment is considered an operational expense by the Internal Revenue Service, and is 100% tax deductible.
5. Better Balance Sheets: The cost of leasing is considered a business expense rather than a long-term debt.
Drawbacks of Leasing:
1. Obligation: When you sign a lease, you are committed to keeping that piece of equipment for the life of the lease. Getting out of a lease can be difficult and expensive.
2. Cost: Though leasing has a smaller initial expense, you often end up paying more overall than if you chose to buy the equipment.
Advantages of Buying:
1. Tax Benefits: Like leasing, you realize benefits under section 179 of IRS code.
2. Control Over Maintenance: When you own the equipment, you aren’t bound to a maintenance schedule and can choose only the services your equipment truly needs.
3. Higher Degree of Control: In every aspect, owning a piece of equipment gives you a higher degree of control. You don’t have to worry about fulfilling the terms of a lease or being penalized for altering your equipment.
Disadvantages of Buying:
1. Higher Initial Expense: Buying requires having more money upfront, which can limit the choices available to you.
2. Bound to Older Equipment: When you buy a piece of equipment, that’s the equipment that you have. To update means purchasing a whole new piece of equipment. If technology in your industry advances quickly, buying might be a poor choice.
3. Restrictions: If you finance your new piece of equipment, that can place restrictions on your financial operations.
How can you know if leasing or buying is the right choice for your business? At Silverback, that’s part of what we do. Not only can we determine if buying or leasing would be most beneficial to your business, we do all the work of implementation. We will find the most affordable option for your business, and handle the details. All you’ll need to do is enjoy the benefits!
Analyzing your equipment options is just one part of the service we provide to business owners. Contact us today to learn how we can help you build a strategic plan for cutting costs, so you can increase the value of your business and realize more profits.
