If your organization needs new equipment, you have to decide whether it is a better choice to lease the equipment or secure financing, such as a loan, to purchase it. Only you can decide which option is best for your company. However, understanding the differences between these two options can help you determine which option would be best for the financial health of your business.
Lease vs. Loan
Depending on your needs and situation, there are positives and negatives for both leasing and seeking a loan to purchase. Loans allow your organization to own the equipment once the loan is repaid, but the process may require more money upfront for the equipment. Leasing may not require money upfront, but may ultimately be more expensive if you are paying per month, and your organization does not own the equipment.
Things to Consider
If you are unsure whether a loan or lease would be better for your organization, here are a few things to consider as you deliberate your options:
- How long will the equipment be needed? Will you use the equipment for the life of the organization or is it only needed temporarily for a project?
- How often will the equipment be used? Will the equipment be used daily, or is it only needed from time to time?
- What is the monthly budget for the equipment? Can your organization afford loan repayment terms? Can your organization afford lease terms?
- How often will the equipment need to be upgraded or replaced? Will you need to upgrade the equipment before the loan is repaid?
- How much flexibility is needed for financing?
Once you answer these questions, you will have a better idea of whether you should lease equipment or secure a loan to purchase the equipment. While there are benefits and drawbacks to both, your needs and finances can help you determine the best solution for your organization so you can have the equipment you need to be successful.