Starting and continuing to run a business costs money. Often, more money than you actually have. Especially if the work you’re doing requires a lot of equipment.
Many modern businesses rely on technology, including computers, phones, smart devices, printers, and more.
The prices add up quickly, especially if you want premium quality. While using lower ended devices takes a smaller toll on your finances, it can affect the quality and efficiency of your work. One way to get top tier devices without putting yourself in excess amounts of debt is by leasing equipment.
The question is, should you lease? Let’s breakdown the pros and cons.
The Advantages of Leasing
Despite what some financial gurus might tell you, there are some hard-to-argue-with advantages to leasing. The most obvious is the small upfront cost. You get high-quality, brand new products with minimal investment.
Whereas actual purchases may require you to take out a loan, leasing can enable you to pay out of pocket. But that’s not all.
Many leasing programs also cover repairs, damage protection, software discounts, etc.
There may even be free upgrades included. If you’re constantly wanting to stay with the newest and latest tech, plans like these can be the cheapest across the board.
Disadvantages to Leasing
In the long run, in most leasing situations, you will pay more with leasing. Sometimes, a lot more. And you also don’t own anything. There is zero equity in your leased products. Should you no longer need an item, you can’t sell it and get some money back.
In fact, many leasing contracts have cancelation penalties. If you no longer need a product you are leasing, you could end up paying extra just to get out of the lease.
Lastly, there are limits on what products/product lines you can lease. While you’ll typically have some options to choose from, buying opens up more options.
Taxes for Buying vs. Leasing
The good news is, whether you buy or lease, you can deduct your expenses from your taxes. Leased items will always have their deductions spread out over time as you make payments. For purchased items, you often have a choice.
You can write it off as a direct expense, or you can depreciate the cost over the time it’s being used.
Leasing will typically offer more deductions since it costs more in the long run. That shouldn’t be a deciding factor for you, but it is nice to know.
Ultimately, it’s best to discuss this with an accountant or tax professional. As it happens, LWS is both of those. If you’re looking for tax help or small business accounting services in the Springfield, Ohio area, we’re here for you.
Contact us today!