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Tags: finance, leasing, lease your business equipment
 If you’ve just opened your start-up company or you need to expand your current small company, one of the things you need to have is office assets right? The question now comes down to: should you lease your business equipment or should you just buy it outright? Whether or not you should do business equipment leasing depends on your company’s situation.
Equipment leasing may be good for you if you’re just stating up and have limited capital to purchase. For one thing, there not much by way of initial expenditures because more often than not, no down-payment is required. As for your payments, they tend to be tax deductible as a business expense so the cost of your assets actually goes down.
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Flexibility is also a key feature of equipment leasing as you will often get flexible terms unlike loans. At the same time, you don’t have to deal with obsolescence since you can trade-in your old stuff for newer models when you redo your contract. And it’s not that difficult to find equipment leasing companies since anything you would need for your company you can lease.
However, know that at the end of the day, you pay a lot more for your assets when you rent it as oppose to buying it outright. This is because interest is charged so instead of paying only $2,000 to buy an office chair, you wind up paying a total of $3,000 instead when you lease.
And the worst part of it all is that despite paying that much you don’t own the chair—it is still owned by the company you rented it from. And unless you have an opt-out clause, you still need to pay off the contract even if you stop using the chair for any reason.
And even if you can opt out you may wind up paying a hefty penalty. Now that we’re done talking about office equipment leasing let’s now talk about buying it instead. When you buy something it’s yours plain and simple. You don’t have to worry about doing something bad to it because the only one who will complain is you.
And get this, the IRS does have tax incentives for newly purchased assets and may even allow for asset depreciation deductions. But unlike equipment leasing, your initial expenses would be quite high since you’ll be buying. And if you’re getting electronic items, you may wind up with a technologically obsolete thing with little to no resale value.
In deciding whether you should go with equipment leasing or buying it instead first ask yourself just how long you plan to keep an asset. If only for a short time then maybe you shouldn’t buy it. And often a lease would have a buyout option at the end just in case you want to keep it at the end of the contract.
Another thing you may want to check out is the obsolescence factor—how soon does the technology change for your asset and how critical is it for your business. If it gets obsolete pretty fast and you need it to be always updated then short leases may be the best thing so you will always have newer models.
If not then buying should be ok. Also check if you’re ok with used assets instead. They’re cheaper to purchase but you may not be able to lease them—often you can only do that for new assets. Finally, what options do you have in terms of financing and the tax benefits that you can get out of either a lease or purchase? Don’t forget to include potential resale value as well.
Equipment leasing or buying both have their advantages and disadvantages. You need to understand exactly what you’re needs are. Considering all the factors will ensure you make the correct choice for success.
About the author
The author of this article Rick Goldfeller is a successful underground Financial Analyst who has been advising and coaching individuals for many years. Rick recently published a book on how to manage your money and attract Wealth and Financial Freedom. More info on his Finance Planning course is available HERE.
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