Whether or not you are thinking about purchasing or leasing industrial machinery, your answer will depend on the situation you are in. Leasing/hiring the tools is a good choice if your budget is limited or if your company needs new equipment every year or so. On the other hand, purchasing it might be better if your business is already established or if you might need it for future projects.
Each company is specific, but the decision of whether or not you should purchase or lease the industrial devices is something that you can determine by looking at the pros and cons of both things. The text below will feature the advantages and disadvantage of both leasing and purchasing the equipment you company needs. Let’s take a closer look:
Option 01: Leasing or Hiring Industrial Machinery
If you opt for renting the things you require, it can help you save some money, and it will allow you to be flexible, however, it might also end up costing more money in the future. The advantages that you can gain from choosing to lease/hire industrial tech includes:
- The Initial Expenses Will Be Lower – one of the biggest benefits you can gain from renting is that you can gain the necessary items with low primary expenses. The companies that lease the devices usually never ask for a down payment, hence, you can get the things you need without harming your budget.
- The Agreement is Quite Flexible – it is easier to get a lease and it will allow you to have more flexible terms when compared to loans for getting the necessary things. This can be quite beneficial if your credit score is not good. If you want to get an idea of what industrial machinery you can hire or lease, check out CPS Lift for more information.
- It is Easier to Get New Equipment – renting the things you need can actually help you solve the dilemma of out-dated devices. For instance, if you opt to rent an older model of a Leguan access platform, once the contract expires, you can choose new, state-of-the-art tools that are overall better.
Now, although the advantages sound quite appealing, there are some disadvantages that you should also consider. These disadvantages include:
- The Cost Will Be Higher in The Future – renting what you need might be more expensive in the future than purchasing it. For instance, hiring a mini loader can cost from 600 to 1.000 dollars every week, which means that it will cost you quite a lot if you need the machine for several months.
- You Do Not Own The Equipment – you will not have ownership over the machinery you choose to lease. Unless the hired machines cannot be used by the end of the renting term, your company not having ownership over the tools can be a major loss.
- You Need to Pay For The Whole Term – you must pay the entire price of leasing the machinery for a specific time, even if you finish using it before it expires. Some companies do offer the possibility of canceling the lease at any time, however, you might need to pay for the entire period with other companies.
Option 02: Purchasing Industrial Machinery
Owning the machines will gain you tax breaks, which can easily make purchasing the equipment more attractive. However, the starting costs might be higher, which is something that does not work for everyone. The advantages that you can gain from choosing to purchase industrial machinery includes:
- You Can Be The Owner – this is, of course, the most notable benefit that you can gain from purchasing the things you require. This is significantly important if the machines are durable and have a long life-span. But, you should consider how advanced it is, you do not want to buy it if there is a newer model coming out soon.
- A Chance of Depreciation Reduction – now, you should know that not all machines will be suitable for Section 179, however, you might still be able to receive tax savings through almost all purchased industrial machinery. Some things that are not eligible for it include real estate purchased, assets bought from close family members, and inventory that can be resold.
- You Can Get Tax Bonuses – there is one more thing that Section 179 can allow you – the possibility of entirely deducting the value of the new machines in the first year of the purchase. During 2012 and 2013, people were able to deduct more than 450.000 dollars of machinery. This is quite good since you can choose to invest the money in other things that your business needs.
Although you’ll be able to avoid paying for some taxes, there are some disadvantages that you should think about including:
- Higher Initial Expenses – some companies might not be able to purchase the things they require due to being unable to cash out the money right away. And, even if you do manage to get a loan, almost all banks will ask for at least a 15% down payment. Lending money might not be a good choice as well since lenders can place restrictions in the future.
- You Might End Up With Old Machinery – as previously mentioned, ownership is, in fact, the biggest benefits you can get from purchasing the things you need. However, once you buy it, it can easily become technologically obsolete, especially if it has a long lifespan. Also, once it gets old, you might not be able to sell it if there are newer models available.
So, there you have it, these are the options that you can choose from. However, before choosing one, ensure that you understand what you are getting your company into, as well as what is better for it. By making a careful and wise decision, you can easily bring take your company to the next level.
As you can see, there are both advantages and disadvantages of purchasing or leasing industrial machinery. So, now that you know what those pros and cons are, you should not waste any more time. Instead, start thinking about what your business needs are and determine which option is better for your budget, as well as your company right away.