Spending capital wisely is key to ensuring your business can continue operating at full capacity. When it comes to buying equipment, it can be difficult to decide whether to rent it for temporary use or make a long-term investment.
On the one hand, it’s often necessary to make large purchases of equipment in order to satisfy the increasing demand for your products and services.
However, spending a significant portion of your funds in one go may impact your ability to afford all the other expenses that come with running a business.
Renting Equipment: Advantages
Tax Deductions: Because payments for rented equipment can usually be deducted from your tax returns, the net cost of your rental decreases.
Upgrades: Depending on the type of business you have and the equipment you want to rent, you may have to consider that equipment becoming obsolete over time. This usually applies to tech such as computers. Buying equipment that becomes outdated quickly turns into a huge waste, making rentals a potentially better option.
Lower Upfront Cost: The biggest advantage of renting equipment is that it has a significantly smaller effect on your cash flow. This affords you the resources to continue operating without being unable to afford other payments in your business.
Renting Equipment: Disadvantages
Lack of Ownership: Renting equipment doesn’t build equity and if anything happens to it, you may be liable for significant repair costs.
Payment Obligations: If you no longer need the equipment, you may still have to pay for the entire lease period, which is essentially a waste of money. However, this depends on the terms of the company you’re dealing with.
For example, with these commercial coffee machines from Liquidline, you can rent them on a weekly basis. This is great for special occasions and events where you won’t have a use for the equipment afterwards. With a massive range of both high end and affordable coffee machines, it’s a great option for both events and long-term use.
Long Term Cost: With monthly payments, the cost of renting equipment may end up being higher than just buying it. Be sure to always compare prices and determine whether renting is truly cheaper.
Buying Equipment: Advantages
Depreciation Deductions: Depending on the type of equipment, you may be eligible for deductions that cover the deprecation of said equipment.
Investment: Of course, gaining ownership of equipment makes sense in the long run, especially if it’s something that doesn’t become outdated in the future. You also have the benefit of being able to sell the equipment when comes the time that you no longer need it.
Buying Equipment: Disadvantages
High Initial Expense: Purchasing equipment often isn’t a viable expenditure of capital, especially for small businesses who rely on that capital to pay for other expenses.
Obsolescence: As much as ownership is a big advantage, it can be detrimental with equipment that becomes outdated. Having to constantly replace this equipment could end up costing more than simply renting it.
If you use the above factors in your decision, it will be much easier to determine whether to rent or buy that equipment. Consider its resale value, long-term usage, upfront cost and how that cost will impact your ability to operate.