From computers to large pieces of machinery, every business has equipment expenses. However, you might be wondering whether you should buy or rent equipment for your business.
Pros and Cons
There are many things to consider before making a choice for your business. Here are some pros and cons to help you make a decision:
Renting Cost Less Upfront…
If you’re tight on budget or your capital isn’t as stable as you want it to be in the future, renting is much cheaper up front than buying equipment outright. It can also keep things more flexible if you need to scale up or down quickly.
But, It Cost More Long Term
Thanks to the cost being broken up over a longer period of time, you’re going to end up paying more than the equipment is actually worth. A $5000 piece of hardware might cost you $6500 in a lease.
It’s Easier To Upgrade When Renting…
Some equipment, especially high-tech stuff, can become obsolete in a short amount of time. Leasing allows you to stay agile and get the latest and most capable equipment, without being weighed down by the old stuff.
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But, You Don’t Own It
If you want to build equity in your business, leasing won’t do that. If the equipment you need is not something that will be obsolete by the end of a leasing term, buying it outright might be a smarter move.
You can also look at whether or not the equipment itself can be upgraded or if you will need something entirely new. That can make a big difference in your choice.
There Are Tax Benefits For Both…
Whether you decide to buy or lease, you can write off some of those expenses for a break on your taxes. When it comes to leasing, this means the monthly cost is basically that much lower.
But, There Are Hidden Costs For Both
If you choose to lease, be careful when it comes to ending the lease early. There are often extra fees you must pay to do so. Insurance usually isn’t included in the base cost either.
On the buying side of things, things break, stop working, or even just the regular maintenance necessary to keep things running smoothly. All of those things cost money, so make sure you bake that into the price assessment.
Making The Choice
Before deciding which option is best for your business, make sure you carefully consider all the sides. There are countless ways to get new equipment, and you should feel confident in the choice you make.
The most basic thing to remember is that buying is cheaper than buying in the long run, but leasing allows for more flexibility when your cash flow is strained.
Also, there are plenty of businesses that do both at the same time! Just because you rented one piece of equipment doesn’t mean you shouldn’t buy the next one. Take it on a case by case basis and decide per item, not across the board.