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Should I Lease or Buy?

If you need to acquire a large asset for your business – such as equipment, facilities or vehicles – you should always consider whether leasing or buying is the right option. In order to make this call, there are several questions you’ll want to consider.

  1. How long will you plan to keep this asset? If your timeline is short-term, leasing is often a better option. With a lease, you don’t have to worry about reselling it when you no longer need it. Find out if you will have the option to buy at the end of the lease, just in case you decide you want to keep the asset once the lease is up.
  2. How often will the technology change? A short lease may allow you to upgrade faster and keep pace with the emerging technology. However, if technology is not a critical factor in your business, it may be more cost-effective to purchase equipment and upgrade at a slower rate, such as every three years.
  3. Are there tax benefits to consider? In some cases, you can deduct the full lease payment from your taxes immediately. Consult with your tax advisor to determine the type of lease and how much you could deduct on your profit/loss statement.
  4. Do you want control of the property? If the asset in question is a building, you will want to consider whether you want to be able to make additions or renovations without getting a landlord’s permission.
  5. What are the long-term costs? In most cases, the lifetime cost of a lease is going to be more than a purchase. You also miss out on potential tax deductions for depreciation.
  6. What are the financing options to consider? In many cases, a lease requires less cash up front than a purchase. Also, if you purchase, you may need to acquire financing with a lender. With a lease, you will often have a lower monthly payment and leases typically require less cash down.

There are advantages and disadvantages to buying and leasing. You will have to answer the questions above to determine which is right for you in light of your financial situation and business needs. Feel free to discuss your situation with a Uwharrie banker. We can review the pros and cons and help you make the right choice.

These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. Uwharrie Bank cannot guarantee that it is accurate, up to date, or appropriate for your situation and takes no liability for your use of this information.  You should consult with a qualified attorney or financial advisor to understand how the law applies to your particular circumstances or for financial information specific to your personal or business situation.