Is it better to buy new equipment or to lease new equipment? Some would argue that as long as your firm has the funds for it, then investing in equipment is a good thing. Even if you don’t use it that often, your capital is still secure. However, leasing equipment is still the better option under particular circumstances.
If you plan on using the equipment for the long term, then it is ultimately cheaper to buy the equipment instead of leasing or renting. The initial outlay will be higher. You can choose, however, to make a lump payment or use a loan to capitalise this purchase. You can then subsidise the monthly payments through income produced through the use of the equipment.
Another advantage offered by buying a piece of equipment is that you can use its depreciation favourably on your taxes. Do take note that if you sell it and recover your investment, the depreciation tax savings you get may be affected, so it’s best to consult a CPA to ensure the correct calculations.
If you lease your equipment, it keeps your funds flexible. You won’t have a lot of capital tied up in a single piece of machinery. You also won’t worry about having to upgrade it when, a few years down the line, a better and more modern piece is available.
By far the best advantage is that you only lease when you need it, so when your firm needs a lorry with a crane for one job, you can pay for it and just return it when you’re done. No need to make sure that your investment constantly has a use, and no need to worry about storage or maintenance. Some leasing firms also provide skilled personnel to operate the machinery, so you don’t need to train someone or hire a third party to operate it for you.
Finding the Best Fit
To know what you truly need, evaluate your business. The type of jobs you accept and the length of time they take are the primary factors in making your final decision.