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Leasing Vs. Acquisition: When To Hire And When To Buy New Equipment

Leasing and acquisition are subjects that every business has to deal with eventually. That’s because every business under the sun requires at least some form of equipment, even if that’s just a car or a laptop computer.

When it comes to where you get your equipment from, you have two main choices: leasing and acquisition. Acquisition is the process of going out and buying new equipment, whether you pay for it outright or whether you sign up to pay it off in instalments. Leasing, on the other hand, relies on borrowing equipment, typically by putting a deposit down and then paying a monthly fee.

In layman’s terms, leasing is like renting a house and acquisition is like buying one. Both approaches have advantages and disadvantages, and it’s important to know what they are so you can determine which one to take and when.

That’s especially true when money is tight, and you’ll find that most people turn to leasing when they’re worried about cash flow despite the fact that acquiring your own equipment can often save a lot of money in the long run.

The good news is that we’re about to share everything you need to know about leasing and acquisition so that there’s one less thing for you to worry about. Let’s jump on in and take a look at when to hire and when to buy new equipment.

Leasing.

Leasing is usually the best option if you’re only going to need equipment for a short period of time, such as if you need something for a specific project and are unlikely to need it again once the project is over. Different agreements allow you different amounts of flexibility, with some leases starting out as weekly or even daily.

One of the big advantages of leasing is that you’re usually not responsible for servicing the equipment. For the most part, if you lease a piece of equipment, the company will pay regular visits to check that the equipment is still in order and to carry out any tweaks or fixes that might be needed. On the downside, if you’re responsible for any of the damage, they might charge you extra to get it fixed.

The downside is that leasing equipment works out as more expensive in the long run, and if you’re not careful then you’ll find that you’ve spent so much money leasing equipment that you might as well have bought it up front. You also run the risk of signing up to a contract that ties you into it for a little longer than you were hoping for.

Acquisition.

When leasing won’t quite cut the mustard, your other option is to look at acquisition. By purchasing new equipment outright, you take a big hit up front but then have less to worry about as long as nothing goes wrong. Just make sure that you insure all of your equipment (75% of businesses are underinsured) and that you carry out regular maintenance using a CMMS system like Limble to stay on top of it all.

When it comes to acquisition, you mostly want to focus on the equipment that you know you’re going to use on a regular basis. Acquisition can also be useful if you need to customise your setup and leasing providers won’t allow you to do it. If you need bespoke or unusual equipment, you may even find it difficult to find a leasing company that’s able to provide it.

One other thing to mention about acquisition is that you don’t always have to purchase brand new equipment. In fact, by purchasing used equipment, you can help to keep costs down, although there are obvious drawbacks to this including the fact that you might have to spend more money on repairs and maintenance than you would on a new machine and that you might not have access to the latest technology.

The best of both worlds.

The great thing about leasing and acquisition is that it’s not a zero sum game where it’s all or nothing. In fact, the two different approaches often go hand in hand, and there’s no reason why you can’t lease a machine for a while to get a feel for how useful it is before then acquiring it for real once you’ve figured out how it might fit with your business.

As with most things, the best thing to do is to go for a balance. You can play leasing and acquisition to their strengths, cutting down on costs and boosting efficiency at the same time. You just need to be able to prioritise equipment and to understand which equipment is mission critical and which isn’t, as well as how often you use different pieces of kit and whether any of it is only needed for a short period of time.

The good news is that by now you should have a good idea of when to lease and when to acquire equipment, and that’s all you really need to get started. It’s important to familiarise yourself with the basic concepts behind leasing and acquisition before you ever actually need them so that you’re ready to spring into action once you know you need some new equipment. Good luck.

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Young Upstarts is a business and technology blog that champions new ideas, innovation and entrepreneurship. It focuses on highlighting young people and small businesses, celebrating their vision and role in changing the world with their ideas, products and services.

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