A business makes decisions daily that will impact the financial course of the company. Whether you’re considering leasing or buying the equipment or land for your business, you need to consider these options in order to make the best decision:
Benefits of leasing:
- Some office equipment needs to be updated after a certain period. For example, computers, cellphones and machinery. Leasing would be beneficial and crucial in such cases, because when the products become outdated they can be easily replaced.
- The landlord is usually responsible for the maintenance of land. This means that the cost it will take to keep the land maintained will be eliminated. The business will not have to be concerned about expenses such as cleaning windows, repairing the roof and mowing the lawn.
- Certain equipment requires an immediate down payment in order to purchase it. The company may need the equipment immediately and may not have the down payment readily available. In this case a lease could be the solution to this problem, as leasing rarely requires a down payment. This is the most cost-effective option if the company is on a tight budget and needs cash flow.
- Most vehicle leases can reach up to four years. During those four years the vehicle will usually be covered by a warranty so if the vehicle endures a breakdown it will be covered. The vehicle will also have a service plan. If the vehicle is in need of servicing and certain parts need to be replaced, such as oil filters, air filters, brake fluid and spark plugs, it will be taken care of. Therefore the business owner can focus on other aspects of the business instead of worrying about the expenditure of the maintenance of the vehicle. Leasing a car for business is helpful in such cases.
- When the business is in its early stages or you have a bad credit score, you may not qualify for a mortgage loan. Leasing land may be the option to opt for.
- The monthly payments that an individual pays will be substantially lower for car leases than when you purchase a vehicle. The business benefits from leasing because it does not pay for the vehicle as a whole, it pays for the depreciation.
- The business may have a specific place they envisioned for their business. If the business has not found a place that meets specific requirements, then leasing land may be the best preference.
If you are a small business you may face tough competition from larger companies who have the latest innovations. It is best to lease equipment to keep up with the latest trends if the business is small with a low budget.
Benefits of buying:
- If your business employs drivers to drive the vehicles. It may be more feasible to buy the vehicle instead of leasing it. The owner will not have direct control of the vehicles and how they will be maneuvered on the road. It is therefore advisable to rather purchase the vehicle.
- A business should rather purchase land if it will appreciate over time. It makes good financial sense to purchase the property because if you decide to sell the land in future the business may stand to gain a good investment.
- The amount of kilometres that will be driven each year should be taken into account when deciding to lease or purchase vehicles. Lease contracts will usually state the amount of kilometres that can be driven for a specific payment. If more kilometres are driven then the company will have to pay more than they originally planned on. Purchasing the vehicle would make more financial sense because there is no limit to the amount of kilometres that can be driven by a company-owned vehicle.
- If the business plans on renovating a place or adding on to the building they want, the best option would be to purchase the land. Leasing the land will limit the alterations that can be made to a building.
- Another benefit of purchasing land or equipment is that you will have full ownership. This is extremely beneficial if the asset you have bought is not likely to become obsolete in the short term.
- The longer the business is expected to be around for, the more financial sense it makes to purchase the equipment. If the equipment will be used extensively over long periods, then the company will benefit from owning the equipment.
A business will endure ups and downs over the course of its life. In certain circumstances it will make financial sense to lease equipment such as in the case of technology where it could become obsolete. The aim is for the business to make decisions that will be most cost effective in order to improve its cash flow.