As a business owner, you will have to update your business equipment at some point, whether that means buying new computer software or replacing old machines with newer versions. Modernizing your equipment can have a lot of positive effects, like keeping up with the ever-changing technology and keeping cybersecurity up to date, as well as improving productivity, outputs, and safety in the workplace. But when it comes to getting new things, you can usually buy them outright or rent them. Which should your company pick?
Reasons To Rent
Since you don’t have to pay for the whole thing at once, leasing can be easier on your business finances than buying expensive equipment outright. Maintenance is often part of the lease deal, so you can get help with inspections or repairs. Be careful, though, because sometimes this is part of your contract, and you have to pay for it. Check the terms of the contract and make sure you budget for it.
If the machinery your company needs will soon be obsolete because of technological advancements, leasing may be the best option. As part of the deal, you will often get access to updates or newer equipment. Leasing can also save you money on taxes since you can often deduct the full cost from your taxable income, just as if you had bought the item outright.
Reasons Not To Rent
Spreading out the cost can help your cash flow, but you may end up paying more than if you had bought it all at once. Unless you have a hire purchase contract, the equipment belongs to the supplier, not your business. In that case, the equipment might be out of date by the time you’ve paid it off.
Reasons To Buy
If you buy new equipment outright, you won’t have to sign a long-term lease, which can be a problem if your situation changes in the future. There are tax breaks, too. Small businesses can take a portion of the money they spend on IT as a tax deduction, for example.
When you rent, you have to deal with a lot of paperwork, but when you buy, you don’t have to. Leasing companies will also probably look into your finances and check your credit. Deals will cost you more if your credit score is low.
Plus, you can save money if you buy something as long as you are going to use it a lot. If you work in an industry where water damage equipment is something you need to use frequently, for example, buying it outright will be more cost-effective than having to keep paying a hire charge every time you need to use it.
Reasons Not To Buy
Depending on how much the equipment you need costs, it may be hard to pay for it all at once. You’ll have to decide if this is something your business can afford. If the equipment is likely to get old quickly or needs to be replaced, you may have to pay the same amount again in a year or two.