Buy or Lease? Smart Financing for Your Equipment
Should you buy or lease equipment for your business? Learn about the benefits of leasing equipment and a range of financing options for equipment and business vehicles.
No one knows your business better than you do, especially when it comes to implementing and upgrading equipment in line with your goals. Your business plans may include buying a new forklift, point-of-sale system or delivery trucks — but do you know which makes better sense, buying or leasing business equipment?
There are a number of variables when weighing lease versus buy options from a cost standpoint. Comparing the purchase price with the cost of leasing is just the beginning. Other factors to consider include the projected life of the equipment, whether it is needed for short- or long-term objectives and how quickly this type of equipment depreciates or becomes obsolete.
Benefits of Leasing
Leasing is a popular option for businesses of any size or type. According to the Equipment Leasing and Finance Association, U.S. businesses, nonprofits and government agencies will spend more than $1.91 trillion in equipment, vehicles, technology, software and other capital goods in 2020, with the majority financed through loans, leases and lines of credit.*
What is so attractive about leasing? Consider these benefits:
- Conservation of capital. With a lease, your sources of capital aren’t tied up in equipment. A lease typically does not require a down payment or collateral.
- Flexibility and convenience. Leasing allows you to respond quickly to new opportunities by getting the right equipment in place with less paperwork and red tape. Generally, the application and approval process for leases is less complicated than for loans. Payment schedules can be matched to your business’s cash flow.
- Upgraded technology. If the nature of your business requires cutting-edge equipment, a short-term lease can help you get the latest equipment without making a big investment.
- Tax benefits. If you buy or lease eligible equipment, you may be able to deduct the full purchase price up to $1.04 million in 2020 under Section 179 of the IRS Tax Code. (Consult your tax advisor for more information.)
- Options for ownership. Leasing with terms that match the useful life of the equipment gives your business control to choose your next move. At the lease’s conclusion, you typically have the choice of buying the equipment, returning it or extending the lease.