Should You Buy or Lease Equipment?
Pros and Cons to Help You Decide
Every manufacturer strives to achieve the most cost-efficient operations, and equipment weighs heavily in the equation. So, does it make more sense to lease or buy machinery and tools? You guessed it—it all depends.
One key factor is the value of available tax deductions. It would help if you also determined how long you need the equipment. For example, do you plan to upgrade every few years? This helpful equipment buy vs. lease calculator guide can help you compare amounts and determine what is best for your company.
Here are some considerations to help you crunch the numbers.
Leasing business equipment can help you preserve capital and have more options, but it can also cost you more in the long run.
Ownership can provide valuable tax breaks and be more cost-effective, but you have to make a large investment.
New Lease Accounting Standard
No discussion about leasing equipment is complete without mention of the new lease accounting rules that will become effective for private companies in 2020. Known as ASC 842, the new standard will significantly change the way in which lessees and lessors account for leases. The purpose and intent of this pronouncement is to increase transparency and comparability among organizations and improve financial reporting.
The new standard will require businesses to recognize lease assets and lease liabilities (whether financing or operating leases) on the balance sheet, and to disclose key information about leasing arrangements.