Making a decision about whether to lease or buy your big-ticket items such as major equipment, vehicles, appliances and such like can be a difficult process.

Whether you should lease or buy a big-ticket item depends on your needs, budget and goals. You need to evaluate your decision based on cash flow, technology and even tax consequences amongst other factors. Let’s examine the advantages of each and how they can influence your decision-making.

ADVANTAGES & DISADVANTAGES OF LEASING:

1. It takes much smaller cash outlay to lease big-ticket items such as houses, cars, computers and others than to buy them. However, you will pay more for the item over the long-term in costly interest payments. The leasing process can also be cumbersome and require documentation that your new #business cannot provide.

2. Leasing gives you a trial period to determine whether the big-ticket item is a right fit for your business and whether you should make a long-term investment in it.

ADVANTAGES & DISADVANTAGES OF BUYING:

1. Purchasing big-ticket items add assets to your business. However, purchasing requires a lot of money upfront, which most new businesses do not have.

2. An item you own is always the property of the company. Its use is for the long-term rather than short-term. This also means if that if you have in fact bought an item that doesn’t fit your business, you are stuck with it or you have to try and sell it off, usually at a significant loss.

3. Once you have paid for your item there is no need for additional monthly expenses since you own it.

4. You can take advantage of tax depreciation benefits on the items that you own.

So what to do?

Decision making is hard because every business and business owner is different. However, for young and #start-up businesses, the most important thing you need is cash. Your focus has to be how to survive the now and holding onto cash is key.  So asssuming the lease terms are not too prohibitive, leasing is often a better option for new and young businesses. But the goal should be to move as quickly as possible away from high interest rate payments to be able to buy the assets you need for the business.

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