What are the different pros and cons of equipment leasing versus purchasing? Which is the better option for a business?
No matter what your skillset, getting to the point of running your own business is considered the apex of any field. Whether you’re a carpenter, plumber, or a personal trainer, chances are you want to take all of your experience and bring it to the next level at some point.
Many of these entrepreneurs know their respective field inside and out, but they all hit the same issue: how exactly do you run a business? It’s much more complex than just your skillset; it requires knowledge in finances, marketing, advertising, and the ability to manage other people.
Most new business owners can get a decent hold on things, but finances always end up being an issue. This is mainly because, when you’re starting a business, you’re not really making money initially, meaning you have to find your funding elsewhere.
Most business owners end up using their own capital, but with all of your different bills, there’s no easy way to pay for everything. An alternative is finding more cost-effective ways to get what you need, like taking out a lease on all of the expensive equipment you want.
However, what are the pros and cons of equipment leasing compared to purchasing? When should you lease and when should you buy equipment?
The Process of Purchasing your Equipment
Like anything else, purchasing equipment for your business has its own advantages and disadvantages. The best way to visualize is by looking at how purchasing works in your own home; a good example is your kitchen equipment.
You might spend a little money to buy smaller kitchen tools and in a few years, after some wear and tear, replacement is not a big deal. You may even spend a few grand on a refrigerator and, within five years, when that breaks, you’ll pay to replace that as well.
However, if you’re running a restaurant that hinges on all of this equipment and business finances are tight, the game changes slightly. It’s no problem to pay for your smaller equipment; generally it has more longevity and paying to replace all of it every few years is nothing.
On the other hand, if you purchase ovens for a restaurant and, within a few years, have to pay to fix this equipment, it becomes much tougher. Many business owners want to own their equipment and think just purchasing it will solve the problem, but equipment doesn’t last forever, especially when you’re using it on a daily basis.
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Plus, most repair companies aren’t cheap, and at that point you might as well just pay to replace the equipment. In addition, you may have outdated equipment and want to get an upgrade, which costs even more as far as equipment.
Pros and Cons of Equipment Leasing
Leasing removes most of the issues business owners run into when they purchase their equipment, mainly the fact that leasing allows you to pay much less at once to get equipment. Instead of paying the full, upfront cost then having to pay that cost again to replace the equipment down the road, you pay a monthly rate.
The rate is both low and flat, so you don’t have to worry about not being able to pay the fee at any time. The equipment is loaned out to you for a pre-determined contract period (usually in years), and during that period, as long as you pay the fee, the equipment is yours to use.
Plus, if it breaks or loses its quality, you can get it repaired by the leasing company without having to pay ridiculous fees. Many leasing businesses also offer upgrades on equipment for continuing a lease, so you can keep your hardware up-to-date every few years.
The trick to leasing is that it’s a contract, and like any other contract, there are some more ideal for you than others. Think of leasing like purchasing a car: you have your own taste as far as what you want, and you need to shop around to make sure you get exactly what you want.
You don’t want to settle for a bad lease, especially if it could mean problems for your business. Overall, there are many different pros and cons of equipment leasing, but a good lease could mean your business gets everything it needs without overspending.
Leasing is designed to make life easier for businesses as far as spending, whether they’re just starting or have been around for a while. To learn more about the pros and cons of equipment leasing, click here.