The cost and benefits of leasing restaurant equipment
Leasing restaurant equipment is an excellent option for any restaurant owner. It offers flexibility, reduced overall costs, the opportunity to lease to own, and the chance to find the right product – and test drive it – before committing to a purchase.
When deciding to lease instead of buy restaurant equipment, one positive is that leasing has a much lower initial cost. Brand new gas ranges on the lower end of the price spectrum come in around $1,800 to purchase outright. Leasing that same gas range would cost around $50/month, coming to a total of $600/year. You would have to own the gas range for three years to justify the cost of buying instead of leasing. This does not take into account the cost of repairs. When you lease, the company you are leasing from is responsible for all repairs that are needed on your restaurant equipment. This means that $50 a month is a set fee for both the equipment and the repairs, while when you own your equipment, your repair costs are in constant flux and can be an unwelcome surprise against your bottom line.
There is not always a decision between buying and leasing. Sometimes, when starting a new business, there is not enough capital to buy everything outright. Leasing is an option, in this case, that enables new business owners to get their restaurants off the ground, when they would otherwise not have the money to do so. Some leases also offer the opportunity to buy the equipment at the end of the leasing period. So if business is going well, and the equipment you leased is the right fit for you, you can purchase it at a reduced rate and add it to your equity.
Leasing is also beneficial over renting, due to the price difference between them. When leasing you have one set monthly price that is stable throughout the year. If you pay $50/month your total for the year is $600. The same unit, rented, would cost around $20/week, the total for the year reaching $1040. While there is more wiggle room when renting, to get upgrades and switch providers, there is still a $440 difference between the two. Also, that is only if the price of renting the equipment does not go up each month, which is unlikely. Leasing locks you into a stable rate for the length of the lease period and is a safe, cost effective, option.
The way a lease is taxed is beneficial for short term budgeting, especially when capital is low. Tax when purchasing large items can be quite high, and is sometimes not taken into account when budgeting. When leasing, you are paying smaller, and a much more manageable, amount of tax – instead of all at once in a lump sum. Your leasing payments may also be tax deductible at the end of the fiscal year, which puts money back in your pocket.
Leasing enables businesses to flourish who do not necessarily have the capital or liquid assets to afford brand new, or even used, equipment. It is also a great way for already established businesses to keep their costs regular, with one reliable, monthly payment and no surprise repair fees. It is an excellent option for new and tried and true restaurant owners.