Lease or Buy Decision for Business
In order to run a business, diverse kinds of equipment are required. To fulfill the requisite, it is not necessary to buy each and every item. Therefore, decision must be taken adequately on the issue of lease and buy. Based on need, goal and budget, choices are made mostly.
To raise capital, lease or buy decision is taken on most occasions. The opportunity to lease an item is often considered advantageous. Different kinds of things such as computer, motor vehicle, location for the office and several other things can be obtained with lease.
Through a guide, it is possible to acquire an analysis on lease or buy decision. Both the advantages and disadvantages of buy and lease option must be considered in order to come at a conclusion.
Lease Vs Buy
To rent items, an agreement is made with the lease option. It can be seen with diverse ranges of assets, buildings, land and equipment quite naturally. Benefits of ownership may not found with the option. However, it certainly helps to save money with payments. Due to presence of this option, more profit can be guaranteed to the business owner. Diverse kinds of lease can be noticed such as operating lease, financial lease and sale leaseback
Advantages of Leasing
- Lesser amount of money is required in order to lease an item. If you want to buy those items then more investment may be required.
- Lease period can be observed as a trial session. Effectiveness of an item can be known in the process.
- Maintenance of the item can be done in better manner with the lease.
- Payment for renting an item is generally eliminated from tax return.
- Due to rented equipment, upgrades can be achieved quite easily.
Advantages of buying
- Through purchase, asset can be added to the company.
- Benefits of tax depreciation can be achieved due to owned status of the item.
- There is no need to pay money on monthly basis with purchase. Presence of additional cost can be avoided easily.
- By purchasing an item, it becomes your property. Therefore, return of item may not be observed at any given occasion.
Leasing vs Buying
Making a choice between leasing and buying
Universal answer cannot be offered on the occasion. Reply on the subject generally depends on the nature of business. In case of a recognized business, matter of expenses must be given added amount of importance. By looking at the strategies related to tax, informed decision can be taken.
Based on flow of cash, decisions can be evaluated regarding lease and purchase. Several factors such as tax situation and technology also play a major role. High amount of flexibility can be achieved through lease. Improved level of cash flow can be guaranteed on the occasion as well. Comparison between both purchase and lease must be done in details.
For a relatively new and small enterprise, lease is considered to be better option than purchase. By taking advice from business consultant, best possible decisions can be made.