Tuesday, we talked about the machines you would need to get a print finish operation up and running. The cost of the equipment we provided was about $2,500 to get started. How to pay for it? Today, we are taking a look at leasing versus buying.
Running any business involves a wide range of expenses, but for a small print finish shop equipment may be the most important, and biggest, expense. The question then becomes whether to buy or lease that equipment?
Several aspects come into play in this decision: upfront costs, fixed versus variable costs, growth factors, and, last but not least, taxes.
Leasing equipment requires less upfront capital than buying it outright. It can also offer you a choice of equipment and trial periods to determine which is best for you. What if you’re leasing binding machines and a UV coating machine, but find you need binding and laminating? You can easily change from leasing a UV coating machine to leasing a laminator instead.
Maintenance costs may also be included in your leasing agreement, saving you a lot of time and money. Say you’re leasing binding machines and one breaks in the middle of a job. You can just have the leasing company bring you a new one.
Fixed versus Variable Costs
It is important to remember that leasing adds to your monthly overhead. Also, when you buy equipment outright the price is set. Leases can be subject to price increases. However, any extra costs associated with leasing may be made up for by the benefits of being able to update your equipment to keep up with competition, as well as having your maintenance covered. Just be sure to do the math and make sure that you’re not paying more in the long run.
This is where the flexibility of leasing can really come in handy. Say that you are a small business and you have a contract leasing a laminator and a binding machine. You get the opportunity to a big job for a prestigious client, but it requires a UV coating machine. You can arrange to add leasing a UV coating machine to your contract. And if you’ll only need it for that one job, you can lease it short term.
You may want to buy core equipment and lease nonessentials, or may need to lease equipment until you can afford to buy it. Many leasing places also offer rent-to-own type programs or discounts on buying equipment that you’ve rented for a certain length of time.
Leasing and rental costs for equipment can usually be counted as business expenses, which are tax deductible. If you buy equipment you can count it on your taxes that year, but it counts on your taxes every year that you lease it. Depending on circumstances, this could come in handy.
So, should a company buy or lease their equipment? For a small print finishing shop the answer is to lease.