Comparing the average interest rates for equipment, should you lease or buy your hardware for your business?
Equipment is a necessity for any business, whether you’re running a fitness center or a private practice or a delivery business; you rely on it on a daily basis and you want only the best to use. Your equipment needs to be able to last a while and has to reach a certain standard to get the job done, but if you’re a new business, chances are you’re having trouble with funds.
When starting a business, money is guaranteed to be tight, and being able to afford the hardware you need is challenging enough, never mind affording good hardware. Most business owners have two choices when it comes to getting equipment: you either lease your hardware or you get financing and you buy it, and there are advantages and disadvantages to both.
One of the more common things to examine is interest; over time, you slowly have to pay a percentage more than what was previously paid, and a high interest rate is generally something you want to avoid. So, examining the average interest rates for equipment, is it a better move to lease or purchase your equipment? What are the upsides and downsides to both?
Purchasing Equipment
When it comes to buying your equipment, it all boils down to price and the type of equipment that you are getting, and most equipment you’ll need will put you in a hot spot one way or the other. Some types of equipment are simply too expensive for you to afford, especially if you want good equipment.
So, you’ll end up taking a loan and deal with low yearly average interest rates for equipment, but the percentages will add up over time, so you want to get rid of the loan as fast as possible. One nice thing about expensive equipment in some instances (like gym equipment) is that it’s low maintenance and lasts a long time, because there’s nothing worse than paying for hardware and having to pay for it again within a few short years.
This is common with a lot of equipment; you’ll pay a good chunk of your startup funds for it, and after a couple years you’ll have to pay again because you need to repair the hardware. Most of the time, the repair costs are so pricey you might as well purchase the equipment again.
Plus, with technological advances being so common, it doesn’t take long for your equipment to become outdated, and if your competition gets a hold of new hardware, you will have to as well. Purchasing equipment normally involves you hitting one of these roadblocks, but there are advantages like you being able to claim your hardware as an asset, giving you funds for the purchase.
Average Interest Rates for Equipment Leasing
Leasing involves a flat monthly rate in exchange for equipment being loaned to you; it’s a contract and has a contract period along with specific terms. The terms are usually where you find advantages, like being able to pay a low fee to get your hardware repaired, or getting upgrades during or at the end of the lease.
In addition, there are tax benefits related to leasing, putting money in your pocket during every return. One of the best things about leasing is that the payments are flat; the average interest rates for equipment leasing do not exist because you don’t pay interest.
However, the monthly rates do add up, meaning that you’ll pay an overall cost by the end of the lease term, and you want to make sure that total payment is fairly low. You definitely want to get the best lease possible, meaning you should do your research and look into different leases to see what terms you can get as well as have a range for contract periods and payments in mind.
That way, you can get the best deal for your business; leasing is only a disadvantage if you make it one, because you choose the lease for your business, and there are good choices you can make. To learn more about the average interest rates for equipment, click here.