4 Questions to Determine Whether You Should Lease or Purchase New Equipment
All businesses need equipment, but this can be a pricey investment. Luckily, there are equipment financing options that can help you get what you need. When you are acquiring something new, you will usually need to determine whether you want to buy it with a loan or rent it with a lease. There are benefits to both of these options, so asking yourself a few questions can help you figure out what’s best for your business.
What Can You Afford?
An equipment lease will generally have lower monthly payments than a loan. Loans can also require a large down payment. If your financing choices are influenced by the cost of your payments each month, then you may prefer to use a lease. However, if you can afford the higher payments, then a loan might work more in your favor, depending on your other needs.
How Long Do You Need the Equipment?
Sometimes, you may only need to use a certain piece of equipment for a short period of time. If this is the case, then it won’t make sense for your business to keep it around afterward. A lease is perfect for situations like this. Once the lease is up, you can easily return the equipment and won’t have to worry about how to sell or dispose of it.
Will You Need to Upgrade Often?
Something else to consider with equipment financing is how often you will need to update the equipment. Certain items, such as computers, use technology that is quickly changing and improving. This means that older models are likely to become outdated before you’ve finished paying off your loan. With a lease, it is usually much easier to swap out the old equipment for something new.
Can You Qualify For Good Loan Terms?
If you are a newer business, then you might have some trouble qualifying for certain types of financing. Loans can be difficult to get if you have little credit history or haven’t been in business for very long. Even if you are approved, you might end up with high-interest rates and other less-than-favorable terms. For small businesses who find themselves in this situation, a lease may be preferable.
When you are looking to get equipment financing, there are several important aspects to keep in mind. Whether you should apply for a loan or a lease depends on your business’s individual needs and qualifications. Both options have pros and cons, so consider each one carefully.