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Established in 1974

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Is it better to buy large equipment or lease it?

 

The question posed by the title of this article may seem strange, but it’s one you should really take time to consider. And, when you are starting out, it’s more than likely that you’ll not have huge amounts of money to play with, so whether to lease or buy the essential equipment you need is something you need to think about carefully. It could mean the difference between the success or failure of your business.

You may think that you don’t need any equipment, but you’d be wrong. Equipment in this sense means everything you need to run your business and can include:

  • furniture
  • vehicles
  • telephone systems
  • computers
  • photocopiers
  • shelving and display counters
  • cooking or refrigeration equipment

And, if you plan on starting a manufacturing business, you also need your production equipment, which could include expensive specialist tools and machinery.

Why should you buy equipment?

If you have the funds it may be worth you investing in all the equipment you need. This way you own it outright and it becomes part of your assets. However, it can eat up a large amount of money that could possibly be put to better use.

Why should you lease equipment?

When you lease equipment, you can have access to it immediately, but you don’t own it. You pay a certain amount each month. This often allows you to obtain all the equipment you need immediately, without having to spend lots of money upfront. This is particularly useful when you are just starting out, as you may not have huge amounts of cash to spare. However, there are some points you need to be aware of when leasing. Take care to check the terms of the lease as they can vary wildly! Most leases have terms that are fixed and range from one year to five years. After this time has passed, you’ll usually have the option to; extend the lease, take on a new one, or buy the item outright. Or you may have an open-ended lease, which allows you to terminate at any time after the minimum period has expired. You could also be offered the chance to buy the equipment at that point. However, it’s worth considering whether the equipment is past its best by the time the lease expires. Perhaps the company you are leasing it from realises that the equipment only lasts for a certain amount of time so they’re happy to get rid of it.

It is worth taking some time to think carefully about this issue so that you make the right decision for you and your business.

If you need any further assistance with your start up plans, please have a look at our Start Your Own Business course. It covers this issue and many more that you’ll have to face when starting and running your own business.