Business Financial Advice
Business financial advice - Which is best, to buy or lease equipment?
Buying advantages:
* Total cost is less. The lifetime cost of most items is cheaper if you buy rather than lease.
* Reduced overhead. A lease requires you to make monthly payments regardless of income. If you buy items only when you have cash, you have lower monthly fixed costs.
* Flexibility. Most leases are for a certain period of time and cannot be canceled prematurely. If you relocate, terminate your business or have other changes, you still have those monthly payments. If you own your own equipment, furniture or vehicles, you can take them with you or sell them.
* Assets instead of a liabilities. Bought items become an asset of the business and increase your business' value. But a lease payment is a liability which decreases your business' worth.
* Tax advantages. The IRS allows you to write off, or 'expense', a large amount of purchases (including furniture and certain equipment, computers, etc.) every year. If you're having a good year, buying provides a better deduction than leasing.
Tips to get the most of the buying option:
* Buy less expensive items; lease more costly ones. You can save money by buying small priced items instead of leasing them, but lease higher cost items so your available cash isn't used up.
* If you're not sure what items will work best for you, use short term leases.
* Get a tax adviser's advice for your individual business situation.
* Think twice before making any purchase or lease decisions. Try to use items you already have, or items you can simply borrow.
Leasing advantages:
* More cash now in your bank account.
* Flexibility. When you buy instead of leasing, it's not as easy to upgrade, particularly with electronic items like computers.
* Lower start-up costs. Leasing lets you get a lot more now at the start for lower initial costs.
* Easier maintenance and support. A lease may include free maintenance and tech support.
* Tax advantages. Most lease payments are 100% deductible in the year paid.
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