When you run a business, some of your biggest expenses will be any vehicles or machinery you need.
There are two main ways to go about this: leasing or buying.
Leasing means that you’re paying someone else to use their property while they pay it off (like a renter and someone else’s mortgage) while buying means you have a bigger upfront fee but you own the item.
As a general rule, leasing can make sense in the short-term but for businesses with long-term goals buying can often be the better option. The purchase price can be a hurdle, and that’s where asset finance often comes in.
To help you make your decision, we’ve compared some of the key factors.
Leasing vs buying costs
The big difference with leasing and buying a vehicle (or a piece of machinery) is the upfront expense. With leasing, you just go straight into monthly payments while buying means you might need to fork up tens of thousands of dollars.
To get around this, you can take out asset finance. That way you can get the money you need without making an upfront payment yourself – although you can add a deposit to decrease the amount you need to borrow.
If you go that route, the two options are very similar. You’ll have monthly payments (including fees, interest and/or charges) and your outgoings will look very similar.
The main difference is that in one example you own the equipment and in the other you don’t.
If for whatever reason you don’t need it anymore, this could cause problems. While you can always sell it to recoup your costs, if you’re only leasing you may actually have to keep making payments even though you’re not using it.
Upgrades and repairs
When you own an asset, it’s a lot easier to make modifications. If you want to change a part or, say, install something on the tray of your ute, it’s completely up to your discretion. It comes out of your pocket, too.
When you’re leasing, you’re a lot more restricted with what you can do. The owners may not want to make any changes so you’re stuck with it however it is.
The upside is that when it needs repairs, they’re often covered by the owner. The downside is that their urgency for repairs might not be quite so great at yours.
At the end of your lease, you may face an opportunity or problem. One is that because you don’t own the asset, you can end the lease and take out a new one on a more modern piece of equipment. The other is that you may not be able to find anything else and the owner might have other ideas for the asset.
Building your business
Once you have ownership of your asset, even if you’re still paying back a loan, you can use it to grow your business.
If you need another vehicle or piece of equipment, you can use it as collateral to get further financing. If you have plans to make your business bigger, using debt in a positive way is one of the quickest and surest ways to growth.
Financing your business
As with any financial decision, you should always take the time to think things through. When possible, discuss any big moves with a trusted professional – whether that’s your accountant, bookkeeper, financial advisor or someone else.
Once you’ve decided business finance or equipment finance is an avenue worth exploring, give our team a call to discuss your choices. We’ll have a look at the best deals on the market and talk you through your options. If you don’t like what we’ve found, there’s no cost and no obligation to proceed. If you do like it, it could be the start of a brand new chapter for your business.
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