To run a successful business, you need the right equipment. But just how should you acquire this equipment? There are three main options: buy it, lease it or hire it. This guide details the pros and cons of each one so that you can decide which is the best option for you.
Buy
Buying equipment gives you full ownership of it. This has a number of perks. You can keep onto the equipment as long as you like and you have the freedom to modify it if necessary. You can also rent the equipment out to other businesses, plus you can sell it for cash when you no longer have a need for it.
You do have to pay for repairs if the equipment breaks. The upfront costs can also be quite expensive when buying equipment - especially when it comes to large or complex machinery. You can buy equipment on finance in order to spread out the cost, but you’ll pay more in the long run than buying it outright due to interest fees. Companies on a tight budget that want to avoid taking on debts often avoid buying equipment for this reason.
When choosing to buy, you have the option of buying brand new equipment or used equipment. Brand new equipment is more expensive to buy, but often more reliable. Another advantage of brand new equipment is that it can often be customized (in cases, where industrial machinery needs to be built exactly to your specs, you may have no choice but to buy brand new). Equipment like a double block & bleed valve typically can’t be leased and probably not best to purchased used. Used equipment is a lot more affordable, but you need to make sure that it’s in good condition. It’s worth using a trusted seller - you can find trusted brands at companies like https://fleetupmarketplace.com/. This can help you to secure the best quality, plus you may have access to warranties or refund policies.
Lease
Leasing involves paying a monthly fee for a fixed term (usually between 12 and 60 months) in order to rent equipment. It’s a lot cheaper upfront than buying equipment, making it suitable for companies on a tight budget. Leased equipment tends to be relatively new making it an affordable way to access higher quality equipment. At the end of your lease term, you may have the option to upgrade to new equipment or buy the equipment of the lease company for a discount.
Because you’re renting the equipment, you don’t have as much freedom as to how you use it as you would when buying. You can’t sell it or rent it out to others and there will usually be restrictions when it comes to modifying leased equipment (usually any modifications will need to be easily removable so that you can return the item as you were given it at the beginning of your lease). You may also end up paying more in the long run when leasing than when buying - after all, lease companies will want to make a profit on any equipment they’ve bought.
Managing your leased equipment may feel like a gigantic task, but utilizing ASC 842 lease accounting software can help you track your leased equipment, and make sure you capitalize on any tax savings for your business.
You should spend your time searching for a reputable lease company. This way, you can be sure that you’re getting good quality equipment. Some companies may be able to pay for repairs for you, however many will expect you to still pay for repairs yourself - this is something to look into.
Hire
Hiring involves renting equipment for a short temporary period. This could be a month, a week or even a day. This can be useful when it comes to equipment that you don’t need to use on an ongoing basis. Examples could include hiring chairs for a one-off event or hiring a specialist tool to help repair a specific car.
The cost of hiring depends on how long you plan to hire the equipment. If you’re hiring equipment for a couple days it will usually be pretty cheap. If you’re hiring it for several months, it could be quite expensive (in these cases, it may even be cheaper to buy or lease the equipment for a year). As with leased equipment, you don’t own it and therefore can’t sell it, rent it out or modify it. A benefit over leasing is that you usually shouldn’t have to pay for any repairs that are due to wear and tear.
You should always choose a hire company with a good reputation. This way, you know that you will be receiving top quality equipment. Some hire companies will be willing to deliver the equipment to you, while others may want you to pick it up - consider which is the best option for you. This post at Quarry Magazine discusses more information on short-term hire of equipment.