When it comes to starting a new business, there’s a good chance that you’re going to have to invest in some equipment. The amount of equipment you need and the amount it will cost you will depend on the nature of your business. However, it can end up taking up a large part of your initial budget, which is why you’ll want to carefully consider whether you should purchase your business equipment or lease it. The following are a few things to consider:
- Leasing will cost less initially, which can help if you’re working with a smaller budget and need to put money towards other areas of your business. Not to mention that buying certain pieces of equipment outright may be way too expensive if you’re a small business owner that’s just starting out.
- Any equipment that you lease can usually be deducted as business expenses on your tax return.
- Leases are easy to obtain and flexible, which means if your budget is small, you could potentially negotiate a longer payment plan to help reduce your monthly costs.
- When you lease equipment, you’ll be in a better position to upgrade your equipment so that you don’t get stuck with equipment that’s obsolete after a few years.
- If you buy equipment, you can recover some of the initial costs by selling it when you no longer need it or if you’re looking to upgrade.
- Buying equipment is actually less expensive in the long run. For example, the amount that it would cost to lease one piece of equipment over a three year period could end up exceeding the outright cost of that piece of equipment had you bought it instead.
- If you lease equipment but no longer need it, whether it’s because your business changed directions or you simply no longer need the equipment, you’ll still be obligated to pay for the whole term of the lease.
- By purchasing your equipment outright, you’ll be able to fully deduct the cost of the equipment in the first year and then up to certain amounts for the subsequent two years.
- You can deduct equipment costs for depreciation.
As you can see, there are a lot of benefits and drawbacks to both leasing and purchasing equipment, so you’ll need to consider your company’s unique needs. For more business advice, or to inquire about our accounting services, contact us at Valezar & Associates today.