Do you need equipment for your trade business, but are not sure whether you should lease or buy it? If you have limited capital or need to upgrade your equipment every few years, leasing might be the better option. However, if you’re an established business looking for equipment with long usable life, you might want to purchase it.


Business tools and equipment

 

Leasing business tools and equipment will preserve your capital and offer greater flexibility, but it may cost more in the long run.


If you lease, you’ll acquire assets with minimal expenditures, and no down payment that could affect your cash flow. Lease payments are often tax deductible and have more flexible terms than loans for purchasing equipment as well. You may be able to negotiate a longer payment plan and lower the costs. If you lease, it will be easier to upgrade your equipment when your leased items get outdated.


However, leasing is often more expensive than buying. Leasing a computer for three years at $40/month will cost you a total of $5,760 for a computer worth $4,000. You also don’t own the equipment and don’t build equity in it. You need to pay for the whole lease term even if at some point, you don’t need the equipment anymore. Some may allow you to cancel the lease but not without early termination fees.


Business tax deductions

 

Buying equipment offers ownership and tax breaks, but we get that those high initial costs aren’t for everyone. It’s a good option to buy equipment if it’s unlikely it will soon be outdated ie: machinery or office furniture.


Remember, all equipment purchased over $1,000 can be depreciated at varying rates – meaning that the capital paid for the equipment will eventually be returned to you in the form of a tax deduction.


Although the above sounds great, sometimes the high initial cost to buy, out way’s the possible tax deductions and benefits. If you borrow money, most banks would still require a 20% down payment and may tie up your lines of credit. You may also be stuck with old equipment if they become obsolete, and unfortunately, some business equipment can have little resale value.


Trade accountant

 

Having said all of the above, you need to ask yourself some questions to help you decide whether you should lease or purchase equipment for your business.


Are you going to use the item often or will it just lie around unused most of the time?

What else can you do with the money? Will purchasing the equipment offer a better rate of return on your capital than spending it on exploring other opportunities for your business?

Have a good look at your working capital. Make sure you have surplus cash through a cashflow forecast, which takes into account your forthcoming obligations.


What matters more to your business – having the latest technology through leasing, or having the residual value that you can monetise if you want to dispose of old equipment?

Remember, leasing will allow you to spend less cash in the first year or two, but you will keep paying for it possibly for years if you’ll need it for that long – whereas buying will only cost you a one-time big-time amount in the first year.


If you need help deciding, let’s look into your finances and come up with a plan. Give us a bell and we’ll get you on the right track!


Your Outside Team

 

 

 

Contact 

Wellington Accountants | 

Business Accountants | 

Construction Accountants 

Property Accountants 

Contractor Accountants 

Hospitality Accountants |

Property Developer Accountants | Accountants Wellington | Wellington Accountant | Restaurant Accountants | Cafe Accountants

AddressLevel 2, 182 Vivian Street,

Te Aro, Wellington 6011, New Zealand 



Mail: PO Box 24-457, Wellington 6142

Phone04 889 2975

New Zealand Accounting, Bookkeeping & Property Business Consultancy Services | Wellington & Lower Hutt Xero Property Accountants Business coach business consultation business adviser

Business Accountants: Understanding Changes in Residential Property Taxation

Recent years have seen significant adjustments to the tax landscape, particularly concerning residential property. The government has responded to calls from various quarters to address investor demand in this sector. Notably, recent changes have been initiated to reverse tax policies affecting residential property, aligning with promises made by both National and ACT during their election campaigns.

Read More »
New Zealand Accounting, Bookkeeping & Property Business Consultancy Services | Wellington & Lower Hutt Xero Property Accountants Business coach business consultation business adviser

Business Accountants: GST on Housing: Avoid Surprise Tax Bills

As we approach May 2024, it’s crucial to address potential GST pitfalls when selling property. Over the past decade, there have been instances where property sellers, unaware of GST implications, faced unexpected tax bills, especially those converting residential properties into holiday rentals or using them for business.

Read More »

Aro Valley Accountant | Berhampore Accountant | Breaker Bay Accountant | Brooklyn Accountant | Churton Park Accountant | Crofton Downs Accountant | Glenside Accountant | Happy Valley Accountant | Hataitai Accountant | Houghton Bay Accountant | Island Bay Accountant | Kaiwharawhara Accountant | Karori Accountant | Kelburn Accountant | Kilbirnie Accountant | Makara Accountant | Miramar Accountant | Mornington Accountant | Mount Cook Accountant | Mount Victoria Accountant | Newlands Accountant | Newtown Accountant | Ngaio Accountant | Ngauranga Accountant | Northland Accountant | Oriental Bay Accountant | Owhiro Bay Accountant | Redwood Accountant | Rongotai Accountant | Seatoun Accountant | Shelly Bay Accountant | Tarikaka Settlement Accountant | Thorndon Accountant | Vogeltown Accountant | Wadestown Accountant | Wellington Central Accountant | Johnsonville Accountant




Restaurant Accountant | Cafe Accountant | Hotel Accountant | Trades Accountant | Bricklayer Accountant | Plumber Accountant | Painter Accountant | Accommodations Accountants | Accountants for Electricians | Accountants for Health Professionals, HVAC Accountants | Accountant for Architects | Accountant for Engineers | Accountant for Lawyers | Salon Accountants | Shop Accountants | Publisher Accountants | Cleaning Services Accountants | Dentist Accountants | Accountant for Schools | eCommerce Accountants | Home and Garden Accountants | Manufacturer Accountants | Farm Accountants | Medical Accountants | Club Accountants | Pub Accountants | Retail Accountants