Should you rent or buy your own equipment?

Presented by
  • Earthmovers & Exacavators

[SPONSORED CONTENT] Hiring equipment could be a financially sound option for people that are just starting out their business. Purchasing heavy equipment that will be able to get your business moving on the up is not cheap. However, there are times when owning your own equipment can be more cost-effective in the long run.

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Savvy, one of the BRW’s fastest growing companies in 2015 and leading commercial finance brokerage institution, is here to help you find out whether you will be better off renting or buying your equipment.

The benefits of renting equipment

Renting equipment offers business owners the option of being able to get the equipment they need without having to cripple their cash flow. It is possible to access a lease agreement that doesn’t require security in the form of an asset, which can be beneficial for start-up business that have limited to no assets.

Some additional benefits of renting equipment are that it can allow you to upgrade your machinery without having to fork out a high rate for the initial payment. Furthermore, your business won’t need to shoulder the cost of maintenance when it comes to the equipment. Such options can be ideal for seasonal businesses.

The benefits of buying your own equipment

Purchasing your own equipment can also be beneficial to business since this gives you leverage of being able to access your equipment whenever you need to. Tax deductions can be claimed for some or all of the cost of purchasing your equipment. Keep in mind that the deduction that you will be able to make will depend on the amount you spent and the type of business that you run. 

There are also potential tax benefits that you can tap into. For example, businesses that buy an asset that costs less than $20,000 can write off the business portion in their tax return for the relevant income of year.

You could also claim a credit for the GST you have paid on the price of the vehicle if you are the registered owner and have a tax invoice. Make sure that you check with your accountant or an ATO officer to see which benefits will be applicable to you.

Weighing the disadvantages of both

Buying your own equipment can cost you a lot of money in terms of the initial upfront costs, especially if you are planning to purchase more than one piece of equipment. Although there are plenty of commercial loans on the market that can give you access to such machinery, if you fail to compare features and interest rates, you could end up paying more than you should. 

There is also the likelihood that when it is time to sell your equipment you could sell for less than the initial purchase price.

When it comes to leasing equipment one of the drawbacks is that once you have completed the lease agreement you will have to hand the equipment back. There is also the fact that when renting equipment, your business will not be able to benefit from the tax cuts that come with owning the equipment outright.

 

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