When your business needs new plant or equipment, should you buy or lease? The answer depends on your specific situation, but here are some key points to help you decide.
Why Buying Might Be Best
Buying gives you certainty and ownership. Sure, it’s a bigger upfront cost, but it’s usually cheaper in the long run. When you own equipment, you can use it however you like, modify it to fit your needs, and even sell it if you need some extra cash. Plus, you pay for it all at once, so no ongoing payments, and you might get some tax benefits from depreciation.
If the equipment is something that lasts a long time and holds its value, buying is often the smarter choice. Overall, owning usually costs less than leasing.
Why Leasing Could Be Ideal
Leasing offers more flexibility, though it tends to be pricier over time. It spreads out the cost, so you don’t need to save up or borrow a large amount. Instead, you make regular payments. If the equipment isn’t working out, you can return it, or upgrade to a better model as your business grows.
Leasing is great if the equipment becomes obsolete quickly, if you’re likely to upgrade, or if you’re not sure it’s right for your business. While leasing costs more over the item’s lifetime, it frees up your money to invest elsewhere in your business.
Crunching the Numbers
Deciding whether to buy or lease can be tricky, but we’re here to help. We can calculate the upfront and ongoing costs and compare them to the economic benefits of the new equipment. We’ll look at your cash flow, borrowing costs, and sales projections to help you make an informed decision.
Got questions? Reach out to Sidekick – we offer advisory services to guide you through these decisions.
