Buying vs. Leasing

MoneyWatch for November 2008
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Whether its equipment, computers or office space, all small business owners are confronted with the question of whether to buy or lease. These necessities are often the largest costs that a business incurs, and therefore a great deal of capital can be saved by choosing the approach that best matches your business’s needs. Here are 4 key factors from US Bank that should help in the decision of whether to buy or lease equipment.

Length of Ownership
For long-term ownership, it is best to buy and for short-term, it is best to lease.

Cash Flow
If funds are tight, it would be best to lease. You’ll have immediate access to the equipment with less up front costs than buying.

Ability to Obtain Financing
A loan to pay for equipment could hamper your ability to borrow additional funds for other needs. Leasing could be a good option in this instance.

Tax Advantages
Loan and lease payments can sometimes be a tax deduction.  For more specifics on which approach would lead to a higher deduction, consult your tax adviser.

Click on these links for more information and resources.

Local
US Bank: Buying vs. Leasing
Huntington: Buy or Lease Calculator

National
Small Business Review: Buying vs. Leasing - Business Equipment
USA Today: Buy or lease? It’s a key question for businesses
Inc: Buy or Lease - Computer Equipment
AllBusiness: Buy or Lease - Office Space
Business Owner’s Toolkit: Should You Lease or Buy a Facility?

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Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration. Information on the Nance MBD program is available here.