When your business relies on essential equipment such as machinery or vehicles, deciding how to acquire it is a big decision. Should you buy it outright or lease it over time? The right choice depends on the nature of your business, the type of equipment you need and your long-term goals. In this blog, we explore the key differences between leasing and buying to help you decide which option works best for your business.
What is Equipment Leasing?
Equipment leasing allows companies to access the essential tools they need—without paying the full cost upfront. The lender purchases the piece of equipment and leases it to you in exchange for monthly payments over an agreed period. At the conclusion of this rental agreement you may be able to extend the lease, upgrade to a similar item, or return the asset.
How Does Equipment Leasing Work?
Your business starts by choosing the equipment you need. A broker will then connect you with the right lender based on your specific requirements. The lender purchases the equipment on your behalf and leases it back to you under fixed, affordable terms. You then make manageable monthly payments to the lender throughout the agreed lease period.
Benefits of Leasing Equipment
Cheap starting cost:
Rather than paying the total upfront costs, an equipment lease can protect your working capital by paying monthly leasing fees over an agreed period.
Repairs and Replacements:
As part of the agreement terms, the leasing company may assume responsibility for repairs or replacements if the asset needs them.
Technology upgrades:
If you anticipate needing frequent upgrades due to technological advancements or changing business needs, equipment leasing may be a better option over buying.
Tax benefits:
Equipment leasing could offer potential tax benefits. Your business pays VAT through monthly repayments instead of upfront. If your company is VAT registered, you could potentially reclaim the VAT on the asset cost.
Benefits of Buying Equipment
Full ownership:
With an outright purchase, you own the asset immediately. You have complete control over how and when the equipment is used, upgraded, or replaced.
Ability to sell:
Owned equipment can be sold later to recover some of your investment. This can help reduce the total cost of ownership.
Easier to acquire:
If you have the upfront cash available, buying can be the simpler option. There are no agreements or contracts involved. You simply choose what you need and make the purchase
Considerations of Buying Equipment
High upfront cost:
Buying equipment outright requires paying the full amount upfront using your own capital. This can put pressure on your business’s cash flow.
Maintenance costs:
You are responsible for all maintenance, including costs. This could get pricey depending on what issues you encounter. You could potentially be burdened with broken equipment that you can’t return or sell.
Get started with Time Finance
At Time Finance, we offer equipment leasing through our asset finance solution, making it easier for businesses to acquire the assets they need. As an independent lender, we work closely with brokers to deliver flexible finance solutions to businesses across the UK. In addition to asset finance, we also offer a range of funding options, including invoice finance, secured loans, and asset based lending.
Get in touch with our team today to find out how we can support businesses with our flexible solutions.