To Buy or Not to Buy: When to Lease Business Equipment

October 2, 2020

Every company needs reliable equipment to function. But most often than not, machinery prices are not at all startup-friendly. So these companies have to resort to renting out equipment to continue operations. If you're one of these companies, I'm pretty sure you've wondered: Is renting really worth it?

In this article, we're going to list down a few things you have to consider to decide whether or not renting or buying equipment is the best move for you and your enterprise.

Purchase price of equipment

The main reason why a business owner would opt to just lease equipment instead of buy one, regardless of the benefits is that he simply cannot afford it. And that’s a valid excuse. You know you can’t just go on a shopping spree especially for big ticket items like top of the line forklifts for construction or even that super expensive camera for a startup film studio. There shouldn’t be any issues if it works just as promised.

Maintenance Cost

If you do have enough funds for the initial cost of purchasing an equipment, perhaps you should also consider if you have the budget for maintenance and repair costs? If you own your business tools, you have to be responsible for keeping them working flawlessly which actually does cost a pretty penny. Or else, you better just rent the stuff from other providers so you can stop worrying about those costs ruining your business finances.

Overall Value to Operations

Here, you have to make the distinction between a “need-to-have” versus “nice to have”, especially if budget is no longer an issue. Going back to the previous example, I’m pretty sure that cinematographers actually need professional cameras for their work, hence most of them purchase several of these items at some point. But at the same time, film studios might not necessarily need over-the-top lighting equipment, especially if they won’t use it on a day-to-day basis.

Size of operations

As mentioned above, one important consideration is how big of a business you currently have. If you don’t really have big operations yet, then it’s probably best that you rent out stuff first. This is all the more true for startups, whose future in the industry isn’t really certain yet.

However, I should also point out that buying more equipment isn’t necessarily the best move even for bigger companies. Why? Because sometimes, you might get a chance to join a bigger project that would require you to use more equipment than you currently have. But that doesn’t mean you should go ahead and buy more just for that one-time gig. You can use hassle-free renting services like Flex Fleet so you have the actual flexibility to maximize the utilization of your own equipment, in this case, trucks for construction firms.

Ease of transaction

Unlike purchasing your own equipment, renting involves much more paperwork. You have to sign lease agreements, care agreements, and all that before you get to use rented machines for a specific time period. There would also be extra costs if you returned the equipment late or if you damaged the machines. Then most likely you’d end up having to spend more money than let’s say just buying your own equipment altogether.

Tax incentives

Another advantage of owning business equipment is the tax incentive you’d receive at the end of each year. Such incentives include depreciation benefits for buying secondhand equipment at the first year of its purchase. Obviously, those who simply lease tools won’t really have that kind of tax break.

Reselling Potential

Aside from tax incentives, equipment owners have the luxury of selling their used equipment whenever they wish to upgrade or even put an end to their enterprise. Assets are sellable which means you can transform that into possible profits when all is said and done. You might have to deal with listing the machinery and other equipment or looking for prospective buyers, but at the end of the day, you can still make money out of it.

But for those who only rented out their stuff, then you just pack whatever you own and that’s about it. If you’ve gone bankrupt, you can’t sell off leased equipment to pay off some debts. So in a way, owned equipment can serve as your last resort if you’re trying to get out of loans

Leasing and buying equipment both have their fair share of advantages and disadvantages. Clearly, the main consideration would be if the pros outweigh the cons for you. What matters most is that you are aware of the consequences so that you could properly choose between things you need to buy and can rent for your business. Either way, the success of your business won’t be dictated by how much you own in terms of tools but how you deal with challenges along the way.


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