“I do not gather things, I prefer to rent them rather than to possess them.” (Jerzy Kosinski, Polish-American writer)
Deciding whether to buy or lease equipment can sometimes seem like an impossible choice. There are so many factors at play that it can feel like whatever you do will be wrong. We’ve put together a short list of five things to consider that should make the process a little easier.
1. When do you need the money?
Leasing has lower up-front costs than buying, but in the long term could end up costing your company more. Leasing can make it easier to conserve working capital and maintain a stronger cash flow, especially in the early days. However, if you buy, you will eventually pay the equipment off meaning your long-term costs will drop.
2. Are you going to need to upgrade?
Will the equipment you are looking for need to be upgraded? Or is it something you can use, as is, for years? Leasing equipment often comes with the option of upgrading it on the spot when newer versions come out. This gives companies more flexibility and the chance to be fully up-to-date at all times. If you’re sure of the long-term efficacy of a machine, however, it may make more sense to buy.
3. Are there tax benefits?
Some products will provide more benefits come tax time than others with deductions on offer for both leasing and buying. As your accountants we can help you to understand the exact implications of renting/buying your particular equipment and the amount and timing of tax relief that is available.
4. Do you want to pay for maintenance?
Leasing equipment can often mean that you don’t have to worry about maintaining it. While this will undoubtedly be built into the cost of your leasing contract, there’s great comfort in knowing that the maintenance is taken care of – and that if something goes really wrong you can get an immediate replacement. Do just check your lease agreement for any exclusions or restrictions – there is often an exclusion for “damage due to client negligence,” for example.
5. Do you need to customise your equipment?
If you lease your equipment, you probably won’t be able to customise it. It makes sense that the rental company needs to be able to lease the equipment to someone else when you’re done with it. If you own a machine you can generally do with it as you like, meaning you can take care of your special requirements.
The bottom line
Choosing between leasing and buying ultimately depends on your business’ unique set of circumstances. To get the best advice please consult with your accountant – we’ll be able to lay out all the financial repercussions of your decision.
Disclaimer: The information provided herein should not be used or relied on as professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact us for specific and detailed advice.
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