If your business needs a specific type of equipment to operate, you have a lot to consider in terms of leasing or buying what you need to use. This calculator helps you look at the financial ramifications of either choice by entering the financial numbers associated with each. In addition to the math, though, there are some other factors that you should also keep in mind.
Why should you lease?
It’s the right answer if your equipment will need frequent updating, because most lease agreements allow you to get the newest items more quickly. In many industries, these updates are necessary simply to remain competitive, and a lease keeps you from having to keep using obsolete equipment. There’s also less initial cost with a lease, and your payments are more predictable. You don’t have to set aside a big lump sum to buy what you need, making your budgeting more predictable. If one piece of equipment doesn’t work out because of the changing needs of your business, you’re not left with a big piece of metal on your hand. You also don’t have to pay for maintenance costs. If wear and tear cause problems, or if something stops working, the leasing company gets to solve the problem for you.
Why should you buy?
Over time, you’ll generally pay more with a lease than you will with a purchase, because the lease payments include some money to cover maintenance costs for the leasing agency. You don’t own the equipment, which means that you do not build up any equity. When you’re done with the equipment, you can’t sell it to make some of the money back. The lease terms might be for longer than what you want. If you’re using larger equipment pieces and have to keep them longer than you want, you end up with a storage nightmare. While buying leaves you stuck with maintenance costs, it also means that you get to decide when the repair has been done correctly, and you don’t have to wait for the leasing company to call the repair service. The leasing company might not have want you want when it’s time to upgrade or change equipment, but your agreement might require you to stick with something they have for a set period of time.
There are benefits and drawbacks to both sides of the lease/buy debate. Use the calculator to figure out what your outlay is going to be, and then use the tips in this article to determine whether your needs are more amenable to a lease or a purchase.