Guide to Office Equipment Leasing for Startups: What to Lease and What to Buy
The initial phases of a business startup require intelligent decision making to increase the likelihood of long-term success. One of the key decisions to make is whether to buy or lease office equipment.
Some businesses choose office equipment leasing, and others choose to buy. Some go with a combination of the two. Here are the advantages of each option and some tips to help you determine what’s best for your business.
Benefits of Leasing
- Lower Initial Expenses: Because the majority of office equipment requires little to no down payment through leasing, you can save a lot of money. On the other hand, buying upfront can really add up quickly, especially if you need lots of high tech or expensive equipment. Getting the ball rolling for a startup is often the most difficult time, and profit can be minimal. Fortunately, office equipment leasing will leave you with more cash for other areas of your business like marketing and inventory acquisition.
Benefits of Buying
- Ownership: Although you will probably spend more upfront, it’s yours to keep. For equipment that doesn’t require consistent updates, like desks, chairs, and cubicles, this can end up saving you money in the long term. You are also free to do what you want with the office equipment and can resell later on. This can be a valuable asset in some cases.
- Tax Deductions: You can also save a considerable amount on taxes, especially during the first year you purchase office equipment. Section 179 of the Internal Revenue Code allows up to $500,000 as a first year write-off. There is even the potential for depreciation deductions as equipment loses value later on.
Leasing vs. Buying
Although the needs of every business are different, it usually makes more sense to lease items that quickly become outdated. According to “Entreprenuer,” companies that are heavily reliant upon the latest technology are better off leasing office equipment. Sticking with short leases puts you at an advantage because you can acquire the latest technology, as needed, without spending a fortune. If you only plan on having the asset for a limited period of time, leasing is usually the way to go.
On the other hand, it’s often smart to buy equipment that seldom needs to be updated. If you can afford the initial purchase without adversely affecting your finances, and the equipment won’t need replacing for at least another 10 years, buying may be your best option. When going this route, it’s wise to consider buying used equipment because you will have full ownership, but someone else will have already paid for the depreciation. Many times, you can find equipment that’s next to new while paying well below retail value.
When in doubt, asking yourself these questions should help you make the right choice on buying or leasing a piece of equipment:
- Does technology consistently change for the asset? If so, leasing is smart. If not, buying is often best.
- Can I afford to buy upfront? Sometimes, you simply don’t have the capital to pay for an asset even if the technology does change consistently. When this is the case, you may be forced to lease.
- Which option has bigger tax benefits? Taking this into consideration can yield savings in the long run.
Figuring out the ideal option for acquiring equipment for your business is a big deal. Typically, a combination of leasing and buying is your best bet. After doing some research and understanding your specific needs, you can get what you need without spending beyond your means. This should ensure that you have the right office equipment while having enough funds to cover other expenses.