As a business owner, you have a wide variety of risks to consider with every decision you make. When it comes time to buy office equipment or capital equipment for your business, there a lot of risks that must be addressed before a decision is made. Is buying the best choice for tax purposes? What are the ongoing ownership costs versus costs covered by leasing? Before you make another capital purchase, you need to start thinking about what is best for your business and whether or not leasing is a better option.
In most cases, the leasing company you use will do routine maintenance on any office equipment or capital equipment you lease. The leasing company will send someone to your office once every three months to tune-up your copier, but you still have to buy the paper and ink. Still, having someone pay for routine maintenance, especially on big equipment, can be a financial help.
Depreciation Versus Lease Payments
Most new equipment that you buy can give you a three-year depreciation on your taxes. Leasing, on the other hand, remains a tax write-off for as long as you are making payments. There are other tax comparisons when it comes to depreciation versus leasing, and most of the benefits end up on the side of leasing.
Upgrades And Repairs
As long as your leased equipment broke down due to routine use, then you can expect the leasing company to fix it. Some office equipment leasing companies will also offer you the option of doing routine upgrades to operating systems and other equipment as well. You can also use your lease arrangement to upgrade to newer equipment at a fraction of the cost of buying.
So Why Buy?
Leasing offers some tempting tax breaks and operational costs savings, but you do not own the equipment. If you need to customize your equipment for some reason, you cannot do it if you lease. If you lease a piece of equipment for five years, you still do not own it even though you have made five years of payments. The flexibility of ownership is enticing to business owners, and ownership often fits a business’ plans much better than leasing.
So Why Lease?
There is a lot to be said for paying monthly for office or capital equipment, and then being able to trade that equipment in for new equipment without having to increase your payments. Many companies upgrade their equipment every few years, and constantly leasing that equipment simply takes the place of paying off loans that would have been needed to buy the equipment outright.
The decision between leasing or buying is a very important one for every aspect of your business. It is not a decision you should do off-hand without first making some short and long-term considerations. If you make smart decisions regarding leasing and buying, then you can significantly reduce the financial risk associated with running your company.