Part 1 of our series helps you decide on equipment acquisition options in a period of economic and environmental uncertainty

February 26, 2009

By Ed Dugas

Suppliers and other industry professionals have a number of choices when it comes to acquiring equipment for their businesses. These options include: buying new, buying used, trading-in, and leasing or renting. As businesses plan out the overall cost of buying and ownership vs. the fees associated with rental, many feel leasing provides the most flexibility and advantages for the owner-operator.

Let’s go over the details…

Costs – This is a primary area of concern, of course. Financial decisions always require significant contemplation, but more so with the “R” word being tossed around in the media like a hand grenade. These days, businesses conduct more and more research before deciding on purchases because there is simply less margin for error. When you rent or lease equipment, consider that you only pay usage costs – rent, fuel and operator costs. This is especially poignant when considering the frequency with which you require the equipment. The less “dead money” you have tied up in your kitchen, the easier it is to channel funds into other areas, as necessary, on a more evolving basis.

Flexibility – When you lease equipment, it’s easier to unload it when it’s no longer needed. Searching for places to advertise your unneeded items and arranging ads and potential buyers is often a production you can do without. When you consider transport costs, moving, planning…it takes valuable time away from the running of your business.

Removal – When you lease, it’s easier to get rid of your equipment once you no longer need it. Many suppliers build delivery services into their lease agreements, so you only need to make one phone call for the problem to be solved.

Storage – This detail is specific to renting, but consider what you’ll do with your piece of equipment once it’s no longer needed. If you’re making transitions, and something old simply must go, what do you do while it’s in the process of being sold? When you rent or lease, you only use it when you need it, so you don’t have to worry about what to do with it afterwards.

Insurance – Most rental and leased equipment is insured against damage, so no additional coverage is necessary. This is another detail which doesn’t need to be addressed, thus a potential headache or issue is averted. Additionally, you have the option of entering into a preventative maintenance contract (PMC), which guarantees your equipment won’t become a liability to your operation. A PMC affords you the comfort of never having to worry if something breaks down, and gives you a reason to perform regular maintenance at oftentimes reduced parts and labour costs.

Depreciation and Taxes – Choosing not to invest long-term in equipment allows you to direct your capital towards other more necessary and essential equity-building purchases. Also, as the automobile saying goes: “it’s worth less the second you drive it off the lot.” Your equipment depreciates in value which means, theoretically, it continues to cost you money as it sits at your business.

Conservation of Capital – Leasing frees up your cash and keeps your existing lines of credit open, meaning more long-term financial efficiency and preservation. And you can make use of a lease buy back arrangement on your existing equipment, and use that as a source of capital to expand your business.

Tax Consideration – You may be able to expense your monthly payment rather than depreciating the equipment cost, allowing you to order new equipment, as you need it. Leasing can also accommodate other tax situations and varying cash flow patterns, as well as equipment upgrades and add ons.

Obsolescence – By leasing you can acquire the equipment you need today and use it cost effectively until it no longer meets your needs. You can then upgrade and avoid dealing with outdated and obsolete equipment.

Lastly, one of the biggest benefits of renting is that it eliminates the uncertainty of the future. If you rent, you can always turn the equipment back in if business slows down or if a project falls through. If you own it, you’re stuck with it.

There exist a number of large national outlets for securing equipment, but this list focuses on options available in our area. The reason for this is because we strongly believe that sourcing locally will reduce the overall environmental impact and help introduce individuals to progressive business strategies in a world where the cost and availability of energy is in question. Approaching business like the 100 mile diet will, most importantly, help build sustainable businesses networks and healthier, more stratified communities.

Here are some businesses in the Lower Mainland to get you started:


One Response to “Part 1 of our series helps you decide on equipment acquisition options in a period of economic and environmental uncertainty”

  1. Liya Says:

    Businesses seems to be interesting but do we need any specific qualification to get through ? What will be the initial capitation for this bussiness ? I am not able to get connected with few of the links given above .

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: