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Leasing vs. Buying Seasonal Equipment in Small Business

Leasing vs Buying Equipment in Seasonal Business

The decision as to whether to buy or lease seasonal equipment is not cut and dry. It is somewhat torn and damp. The waters in this sea are murky at best, but there are some considerations that help make the decision easier.

What is the “Season”?

The traditional holiday season is only 2 or 3 months, depending on your business. If this is your season then there is three-fourths of the year that the equipment is not going to be used. It would seem then that there is no reason to purchase the equipment to only be used one-fourth of the year. While this is probably true, it is not quite that easy. Still, if your season is longer, you may have to explore the issue further.

Related Article: Seasonal Franchises: A Good Thing?

Is the Equipment Value Adding the Rest of the Year?

If you buy the equipment, what will happen to it while you are out of season? Will it just sit and gather dust, or can it be made to add value somehow? An example could be an extra oven in a restaurant. If you do a lot of holiday parties you may need the extra oven during the season. It may not be needed the rest of the year. If you can find a way to make the oven generate profit during the rest of the year, it may be better to purchase it. Maybe an effort could be made to increase parties over the course of the rest of the year, and the oven can be used to catch the overflow. Another option may be to use it as a dedicated oven for training, or use it to offer cooking classes throughout the year.

Depreciation and Tax Benefits

Depending on the equipment, there could be tax benefits to purchasing. The only way to know for certain if it would make a difference in your situation is to discuss it with your accountant. If the tax benefits of purchasing versus leasing are high, your decision is made for you.

Published: December 14, 2015

Source: Biz2Credit

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