As a small business owner deciding on a major purchase, you may wonder if it is better to buy or lease business assets. The answer can be complicated, but one rule of thumb to remember is that it’s generally better to lease assets that will substantially decrease in value over time. Conversely, if the asset is expected to last longer than five years, it may be more cost-effective to buy.
Some benefits of leasing are:
- A smaller initial outlay of cash since typically there’s no down payment
- Easier credit terms
- Fully tax-deductible payments
- Maintenance and support
Some disadvantages of leasing could include:
- Possible greater cost over the life of the asset
- No matter how long you lease the asset, you never have any equity in it
- You lose the tax benefit of depreciating your asset
- You are generally committed for the life of the lease
These are just a few considerations involved in the decision to lease or buy. Meet with Filler & Associates before you lock yourself into a contract.We can help examine how it will affect cash flow, taxes and other factors.