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Is It Better to Lease or to Buy Equipment?

  • Whether it is better to buy or lease equipment for your company
  • For those starting or expanding a business
  • How to decide which option makes the most sense for your business

Businesses often require expensive pieces of equipment to meet their objectives, and you’ll need to decide whether it makes more sense to buy or lease it. By carefully weighing your options and conducting a cost analysis, you can determine which option makes the most sense for your company.

Leasing advantages

  • Lower up-front costs
  • Payments are deductible as a business expense
  • Flexible terms
  • Leasing company is responsible for maintenance
  • Equipment can be replaced or upgraded if necessary once lease term is up
  • Business avoids the expense and hassle of disposing of the equipment

Leasing disadvantages

  • Over the long term, leasing is more expensive than buying
  • Company does not gain equity in the equipment
  • Company may need to keep paying the lease even if the equipment is outdated or no longer used
  • Potentially limited selection of equipment

Buying advantages

  • Gains equity and ownership of equipment
  • Eligible for tax deductions and incentives
  • No need to deal with agreements or contracts
  • Equipment can be sold when it is no longer needed

Buying disadvantages

  • Higher up-front cost, including need to make a down payment
  • Possibility of equipment quickly becoming outdated or obsolete
  • Company is responsible for maintenance

Making the determination

Comparing the net costs of leasing and buying equipment can give a broad picture of which option is best for you. However, you’ll also need to consider a number of other factors as well. These include the likely lifespan of the equipment, how long you plan to use the equipment, the revenue-generating potential of the equipment, and the equipment’s resale value.

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