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Equipment leasing: benefits and disadvantages

Student DC March 19, 2019

lease

As you begin collecting information about equipment for practice, you may want to consider leasing equipment instead of purchasing it.

First, the advantages:

“¢ Leases are Easier to Get. You can more easily get an equipment vendor to give you a lease than you can get a loan to buy the equipment.

“¢ Leasing Takes Less Time. Using loan money to buy equipment is a two-step process: first you must get the loan, then you must look for the equipment. With a lease, on the other hand, all you have to do is start talking with the vendor, make your leasing deal, write a check for the down payment, and you can quickly receive the equipment.

“¢ Leasing Gives You the Newest, State-of-the-Art Equipment. Some techniques require you to use new equipment, and to keep it up to date. With a lease, you can often upgrade every few years to the newest model.

Second, the disadvantages:
“¢ No Tax Advantage to Leasing. Although you may not be thinking about it right now, saving on taxes is always important to a business. Many kinds of leases are not eligible for tax savings from the IRS. Ask your leasing vendor about “capital financing” and check with your tax adviser before leasing equipment.

“¢ Leases Have Higher Interest Rates. Trade financing can be more expensive than buying. The vendors may not call it “interest,” but leasing fees and expenses work out to the same thing. Add up the total lease cost over its life and see if it is more expensive than borrowing the money from the bank.

“¢ No Leases for Used Equipment. You are more likely to find used equipment with cash in your hand (from that bank loan). Sometimes equipment vendors will sell you re-conditioned equipment, but they are more interested in selling new stuff.

Purchasing equipment with a bank loan is usually the least expensive and most tax-advantageous alternative. But each situation is different, so do the math.

Related articles from Chiropractic Economics:
Buying Used: The Good, the Bad, and the Ugly
Benefiting from Year-End Equipment Purchases

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Filed Under: Practice Startup, Student DC

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