Is it Better to Lease or Buy Equipment?

Consider several factors when deciding whether to lease or buy equipment for your business. While it's assumed that leasing almost always costs more than buying equipment, there are times it makes clear sense to lease.

Leasing Costs

To figure the leasing costs of your equipment, multiply the per-month lease payment times the number of months. And factor in the cost of borrowing money and the option to buy at the end of the lease term.

Disadvantages of Leasing

Leasing companies can be difficult to deal with. If the equipment doesn't work, they still want their money.

When Leasing Makes Sense

Buying equipment requires immediate cash (cash that could be used for other purposes). Leasing gives you an affordable monthly payment (financed by the leasing company), which frees up your cash flow.

Service

Factor in how complex the equipment is and how often service may be required. Ask whether service is included in the lease price, because when buying you typically get a warranty covering service.

Life

Ask yourself when the equipment will become obsolete. If the "useful" life of the equipment is brief, leasing is a good option. Plus, under a lease, you can usually upgrade, changing outdated equipment.

References

• Lease vs Buy article
• When to Lease vs Buy article