To lease.... or not to lease. That's an issue business owners often face. If you are weighing the pros and cons of leasing versus buying, here are some things to keep in mind.

Cost: Evaluating costs is more complicated than comparing the price of leasing a piece of equipment versus its purchase price. You will also want to consider these issues:

• How soon will the equipment need to be upgraded or replaced? Highly technical or specialized equipment becomes obsolete quickly and may be a good candidate for leasing.

• How will you arrange for service and repair? Leasing arrangements often include maintenance on the equipment. If you're thinking of buying, research the equipment's repair history as well as the cost and availability of reliable service.

• How long will you need the equipment? If your use will be short term, then leasing may be the better option.

Cash: If you've been leasing your equipment, then your costs have been predictable. Purchasing equipment can substantially alter your cash flow. Be sure you consider how purchasing your equipment might affect your business' finances.

• Can you save money by buying or leasing equipment? If - and when - cash savings will be realized is an important factor for you to weigh.

• Do you have the cash available to purchase the equipment? If you use cash for a down payment, you may have less cash for operating and other business expenses.

• How will financing your equipment purchases affect you ability to get credit for other things? If you anticipate having future credit needs, you may want to avoid adding equipment loans to your current debt load.

Taxes: If you own equipment used in a trade or business, you will generally be entitled to a depreciation tax deduction (or a first-year write-off under Code Section 179). And, thanks to recent tax law changes, this year's new equipment purchases may be eligible for bonus depreciation deductions. When you lease equipment, your payments are generally tax deductible, although certain types of leases are treated as conditional sales contracts instead of "true leases."

Copyright 2004 by NPI.
Used by permission