Business Equipment: Buying vs. Leasing
Decide whether to lease or buy by learning about the pros and cons of each.
Should your business lease or buy equipment? The answer depends on your situation. Leasing equipment can be a good option for business owners who have limited capital or who need equipment that must be upgraded every few years, while purchasing equipment can be a better option for established businesses or for equipment that has a long usable life.
Each business is unique, however, and the decision to buy or lease business equipment must be made on a case-by-case basis. Here's a look at both options.
Leasing Equipment
Leasing business equipment and tools preserves capital and provides flexibility but may cost you more in the long run.
Advantages of Leasing Equipment
Less initial expense. The primary advantage of leasing business equipment is that it allows you to acquire assets with minimal initial expenditures. Because equipment leases rarely require a down payment, you can obtain the goods you need without significantly affecting your cash flow.
Tax deductible. Another financial benefit of leasing equipment is that your lease payments can usually be deducted as business expenses on your tax return, reducing the net cost of your lease.
Flexible terms. In addition, leases are usually easier to obtain and have more flexible terms than loans for buying equipment. This can be a significant advantage if you have bad credit or need to negotiate a longer payment plan to lower your costs.
Easier to upgrade equipment. Leasing also allows businesses to address the problem of obsolescence. If you use your lease to obtain items that may be outdated in a short period of time, such as computers or other high-tech equipment, a lease passes the burden of obsolescence onto the lessor. You are free to lease new, higher-end equipment after your lease expires.
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