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Lease or Buy?

When facing this question, there are several factors to consider.

Wondering whether to buy or lease equipment? Visit your accountant for information on current rulings and ask whether any potential leases are suitable for write-offs. Leasing often allows for limited start-up capital to be stretched because it significantly lowers the initial cash outlay. However, if you have a legitimate tax-deductible lease, you don't acquire equity in your equipment and therefore won't build up your balance sheet.

A financial statement that shows a strong net worth is important to any business, especially one that is homebased, because it lends an added degree of legitimacy. In addition, the total cost of leasing over a period of years is higher than if the same items were simply purchased. Consult your accountant about the wiser choice for you.

The tax laws generally make the purchase of equipment, whether new or used, more attractive than leasing. Some financial sources offer no-money-down options for equipment purchases or leases. No-money-down leases enable you to own the equipment when the term of the lease is completed.

Excerpted from Starting a Home-based Business

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