The question of whether to lease or buy medical equipment for your business can be a difficult one to answer. From keeping up with the latest technological developments to managing budgets and cash flow, there’s quite a lot to take into consideration.
With new models and versions being released to market all the time, it often comes down to striking a balance between necessity and affordability.
We decided to take a closer look at the pros and cons of lease or buy medical equipment, to help you make the right decision for your business.
Lease or Buy Medical Equipment: Pros and Cons
What are the pros of leasing medical equipment?
Leasing medical equipment can offer benefits such as:
- Helping cash flow: Leasing medical equipment ensures you don’t have to commit to large upfront costs. This can free up working capital for other areas of the business, such as supplies, staffing and other key expenses.
- Using the latest equipment: Because you will be leasing the equipment rather than owning it, you can keep up with the latest technological developments. This is ideal for companies that rely on imaging systems or diagnostic tools, as these tend to date quickly.
- Offering tax incentives: Another plus is that you can deduct most lease agreements as an operating expense. This can simplify accounting and potentially ease your tax commitments.
What are the cons of leasing medical equipment?
There are some potential downsides to leasing that should also be considered:
- No equipment ownership: Unless a buyout clause is included in the deal, you will need to return the equipment when it expires. This is a key difference to financing, which allows you to build equity towards full ownership.
- Higher costs: This depends on the terms and conditions of the leasing deal. healthcare financing solutions that involve leasing often have interest added to the monthly repayments. Over the full term of the lease, you could end up paying more than the purchase price.
- Long-term dependency: It’s important to strategically manage equipment leases, as it can become a recurring expense that impacts the budget across the rest of your business.
What are the pros of buying medical equipment?
Before you buy medical equipment, you should take the following into consideration:
- Full equipment ownership: Once you put down your money for the equipment, you become the full owner, so you have complete control over how it is used or resold, turning it into a business asset.
- Lower long-term expenditure: While you will pay more upfront to buy the equipment, you won’t have to make any monthly repayments. This reduces the financial burden over time, while buying upfront will often cost less than committing to a long-term lease contract.
- Potential tax benefits: According to section 179 of the IRS tax code, you can write off qualifying purchases during the tax year. This applies to equipment that is bought or financed, allowing the full cost to be deducted.
What are the cons of buying medical equipment?
You may find that buying medical equipment could involve some drawbacks, such as:
- Higher upfront costs: A stumbling block for many businesses that want to buy medical equipment is finding enough cash up front. Pulling your financial resources in one direction can have an impact on the rest of the business, potentially reducing key budgets for other departments.
- Deprecated value: As soon as you start to use the equipment, its value starts to depreciate, which means if you have a longer-term plan to eventually sell it, you will have to suffer a loss on your purchase.
- Equipment obsolescence: In addition to the depreciated value, equipment that is purchased can also quickly become out of date. This can lead to costly upgrades and replacements, especially if your business needs to be using cutting edge technology.
Final thoughts
If you are thinking about whether to lease or buy medical equipment, this could help you access the latest models, support your cash flow, and maybe even offer tax incentives. On the other hand, you will eventually have to return the equipment, which could cost more than buying it outright. Purchasing the equipment means it is yours for good, which reduces long-term costs and provides tax benefits. However, buying the equipment does require you to put down more cash up front, and its decreasing value and relevancy can make it difficult to get a return on your investment.
