Buying Or Leasing Business Equipment: Factors To Consider

Buying Or Leasing Business Equipment: Factors To Consider

Buying and leasing equipment have their advantages & disadvantages, and you can opt for either or both, depending on your financial stability and situation.

Amid rapid technological advancements, it is imperative to keep your equipment and machinery updated. Leveraging technologically advanced business equipment can benefit your enterprise in more than one way. With the help of advanced equipment, you can fast-track your production, increase output, and eliminate errors in production. However, such equipment can be expensive and hard to acquire if you are tight on budget.

In such a scenario, you can buy equipment with funds availed through an MSME loan or lease your preferred equipment. Buying and leasing equipment have their advantages & disadvantages, and you can opt for either or both, depending on your financial stability and situation.

When it comes to buying or leasing equipment, the main difference lies in the ownership of the commodity. Let's first look at some advantages of buying equipment, followed by the benefits of leasing business equipment.

Benefits of Buying Business Equipment

There are certain benefits if you buy equipment instead of leasing it. Remember, it might require upfront payment, which you need to plan. In this case, an MSME loan can also come in handy. Listed below are some advantages of buying equipment:

● Will have full ownership of the equipment

● Can be counted as an asset on one's books

● Freedom of using the equipment as per predefined standards or protocol

● Can sell the equipment whenever required

● Avail tax benefits from the depreciating value of the asset

Benefits of Leasing Business Equipment

When you lease equipment, you don't get ownership of the asset. You rather rent it out for a particular period and return it after usage. Leasing equipment can be a good option to conserve your cash flow. Also, it can be a good option if you don't want to invest in new equipment immediately. Some other advantages of leasing equipment include the following:

● Cheaper down payment/ No down payment (depending on the leasing company)

● Flexible terms (you can buy out the leased equipment)

● No maintenance cost

● Easy to acquire

Factors to Consider Before Buying or Leasing Business Equipment

Basis the points, you can buy or lease your business equipment. However, there are certain factors you should consider before opting for either of the two.

Purpose of the equipment: Before buying or leasing equipment, it is essential to figure out the purpose of the equipment. Short-term vis-à-vis long-term usage, the life of the equipment, and its efficiency should be considered. Certain equipment becomes obsolete with time. If you think the equipment will last for many years, you may consider buying it. If not, you can lease it and purchase an advanced model later.

Working capital: Understanding what is working capital is crucial for every business owner. You may consider buying new business equipment if you have excess capital and a healthy cash flow. If you don't have extra capital in hand, buying new equipment might stress your finances. In this case, leasing equipment can be a better option.

Business goals: What are your business goals? Do you want to focus on growth? Or do you want to be more profitable? If you are focusing on growth, you are also thinking about conserving capital for your enterprise. Here, you can consider leasing the equipment. Otherwise, investing in new machinery can be a good idea. Owning the equipment will help you increase your output and keep your business operating costs low.

Equipment maintenance: If you don't want to invest your time and money in the maintenance of the equipment, leasing can be a better option for you. The leasing company takes care of the maintenance and repair of the equipment, which means you don't have to worry about getting the equipment repaired or renewed. However, if you buy the equipment, you will have to take care of all the repair and maintenance costs yourself.

Moving Ahead

The decision to buy or lease equipment depends entirely on your equipment requirement and cash flows. After considering the factors mentioned above, you can choose whatever works best for your enterprise. You can always go for MSME loans if you find yourself short of funds while buying or leasing equipment. These loans are unsecured and can be availed of at low-interest rates. You can use the funds to procure, replace, or upgrade your business equipment effectively.

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Editor : Riya Kumari
Creatives : Devanshee Singh