Whether you are leasing or buying equipment, each has its own advantages and disadvantages. Depending on your need and what you have at the moment, leasing or buying will be your solution to the problem at hand. You just have to know when to lease and when to buy. Each has its own strengths at a certain point of your business situation. The same way, when weaknesses arise, it’s time to consider the benefits of the other.
When you lease equipment
Leasing gives you the capacity to operate with a low budget because your initial expense would be low and terms are flexible. However, if you continue leasing even when you already have the chance to buy, the cost will be expensive in the long run. Leased equipment can also be tax deducted as an expense. When your equipment is old, you can have it replaced at the end of the lease term which is renewable every year or two. The down side, aside from the long-run total expense, is that you can never own the equipment and you have to continue paying for the duration of the contract.
When you buy equipment
When buying your own equipment, you have to have the ready money because you buy the whole amount and the equipment is yours. Whatever you want to do with it, no one can stop you. For buying, you get tax incentive and if your equipment is eligible, you can receive depreciation deduction. Since you are able to buy the equipment, the initial cost is considered a disadvantage for those who are not ready with the amount. You can use the equipment for as long as it is working, thus, over the years, the cost per year gets smaller, although you are stuck with the same equipment too. You can opt to sell it and buy a new one every two years to battle obsolescence but you will have to take care of that yourself.
Should you lease or should you buy
How much money do you have available? If you have not enough, you do not have a choice but to lease the equipment. When you have the money, how long do you intend to use it? If you are going for short term, leasing is wise but if you are going for long term, better buy instead. Try to compute all the possible savings you are going to have via tax deductions and interest rates. Depending on what is important to you, you decide accordingly.
Leasing or buying is chosen depending on what your business is capable of doing and how long you intend to use the equipment. If you are going long term, it is wiser to buy but it still depends on what is important to you (like having a new equipment every two years or owning the equipment and making it last for decades).