Leasing vs Buying: Which Is Best for You? When it comes to acquiring equipment, buildings or cars for your business, answering these five questions will.

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Leasing vs Buying: Which Is Best for You? When it comes to acquiring equipment, buildings or cars for your business, answering these five questions will help you make the choice that’s right for you. When it comes to purchasing and financing the asset, you only get to deduct the interest portion as an expense.

How long do you plan to keep the asset? If you’re only planning to keep it for the short term, you may find that leasing is a better alternative than buying it and trying to resell it when you no longer need it. You’ll want to find out if there’s a buyout option at the end of the lease if you decide you want to keep the asset after the original lease is over.

Is new or used equipment the best fit for your needs? One important task you’ll want to undertake is to analyze the cost/benefit of new vs. used equipment, especially if you’re just starting out. Investing in a lot of new equipment when you’re just getting started can place an undue burden on your cash flow and finances. It might be better to start small and increase your capital acquisitions as you increase your profits and can support the growth.

How frequently does technology change with this asset? For assets that become outdated rapidly, it may be wiser to take on a short leases so you can always have the most recent technology,

What are my financing options for purchasing vs. leasing? Purchasing tends to require a higher monetary outlay initially in addition to having to finance your purchase through a lender. Depending on your situation, this may not be a viable option if you don’t have a large enough cash reserve. Leasing generally requires less cash down, and the monthly payments are often smaller.

What are the tax benefits of buying vs. leasing? There’s usually a tax benefit associated with leasing where you get to deduct the full lease payment immediately. Leasing and buying both offer advantages to companies. The key to making the right decision is understanding exactly what your company’s needs are and the purpose of the asset.

The Loan Amortization and Loan Analysis templates are based on the PMT function, which calculates a loan payment with a fixed interest rate and constant payments.PMT