Small business owners, especially those starting out, require a great amount of stuff — from office space to office equipment and so on — for their business operations. But this does not necessarily mean that you have to buy everything from the get-go.
The question is: Should you purchase what you need or lease them instead? Ideally, your answer should be based on your specific requirements, goals, and budget, suggests a business bank account expert in Golden Valley.
Below are the main advantages of each to help you decide.
Advantages of Leasing
- You can test out equipment first to figure out if they’re right for your needs.
- You don’t need to spend too much as you would if you buy equipment.
- You could deduct the cost of leasing on your tax return.
- You’ll get a maintenance contract.
- It might be more affordable to keep up with technology when you upgrade rental equipment rather than buying replacements.
Advantages of Purchasing
- Buying equipment would add to your business assets.
- Your business would own all purchased equipment.
- You won’t have to pay extra monthly expenses once you pay off all the equipment.
- You could get tax benefits on all the equipment your business owns.
How to Decide
There’s no one-size-fits-all solution or an easy answer since every business is different. Preferably, you need to assess your decision according to your budget, cash flow, tax implications, technology, and other factors specific to your business.
You should weigh the potential advantages of leasing, including better cash flow and flexibility against the advantages of buying equipment, including depreciation policies for tax purposes and ownership.
When trying to decide if you should lease or purchase a specific piece of equipment, try to work out its approximate net cost. Make sure to take into account resale and tax breaks when calculating.
Lastly, once you’ve determined which option is most appropriate, consider other things too — the possibility of the equipment becoming obsolete if you’re buying or your need for the equipment expiring before your lease, for instance.