If you’re in business for yourself, you can get a very large contract and then find that you don’t have the equipment you need to get the job done. It makes sense to get the best equipment to get the job done as efficiently as possible, but acquiring equipment also requires using the best financial strategy to get it done. If the job is going to be done quickly, you may not use that equipment for quite some time, or maybe never again, in which case it makes sense to rent rather than buy.
Of course, maybe you can buy used equipment to complete the job, make sure it’s maintained while you’re using it, and then sell it as used equipment when you’re done. If you’re going to be renting expensive equipment for a long period of time, it might make sense to simply buy it and then resell it later. Or, you may find that you can send your sales team out to get more business of a similar type using the same equipment so you can continue to use it after the first job is done.
If you can pay cash for a team that makes more sense, that’s if you have money to spare. If you take on a very large account, that account may not pay you as fast as you’d like and you’ll need the cash flow to pay for your work and expenses until you get paid, therefore you can’t buy a piece of equipment with the money you save or have previously earned. So it makes sense to lease the equipment, rent the equipment, or borrow the money to buy the equipment.
Now, it’s important to look at the fine print when it comes to leases because there are many types of leases, some offered by the company that makes the equipment and others by separate companies that work with the equipment company. Some of these companies pay a commission to the equipment company that sells you the products. You may be offered a closed lease or an open lease. In a closed lease, you own the equipment after all lease payments have been made. On an open lease, you must return the equipment, but when you do, it must be in good working order; otherwise you have to pay to do it or buy the lease.
This could cause you to pay thousands of dollars to bring the equipment up to a fair and usable standard. It makes sense to know what you’re dealing with, equipment capabilities, maintenance costs, normal wear and tear, and then talk to a tax accountant and find out if it makes more sense to buy or lease. . If you lease it, you need to know what type of lease it is, and if you’re borrowing money to buy it, you need to account for those costs as well, along with any accelerated depreciation schedule tax strategies you might use. In fact, I hope you will please consider all of this and think about it.