Are you planning to buy new restaurant equipment? Then you should know just how expensive it can be to invest in new restaurant equipment, especially when you’re just about to launch a new restaurant. It makes much better sense to lease restaurant equipment instead of purchasing it. Let me explain why.
Reason #1: It’s a great way to get the equipment you need with minimum capital.
One of the best reasons to lease restaurant equipment is that you can get all the equipment you need to get your restaurant up and running even if you don’t have much money to begin with. You can get the business going with a monthly payment; there is no need to make a lump sum investment. This can be very beneficial to you as a business owner. Keeping your cash reserves filled is beneficial in the early starting days.
Reason #2: Any equipment you lease is tax deductible.
The IRS treats all lease payments as a business operating expense, so that’s tax deductible. Also, when you lease equipment, you will have to pay taxes each month, not as a large lump sum. However, you cannot get a tax deduction on the depreciation of the leased equipment; that can only be claimed on equipment you own. We explain more on the Section 179 FAQs section.
Reason #3: Leasing makes sense when you might need to upgrade in the future.
When you start a new restaurant, it makes more sense to invest in entry-level and the bare bones equipment. You don’t want to tie up all your restaurants capital into advanced high-end equipment just yet. Financing and Leasing equipment helps many business owners with that problem. On the other side, you can protect your downside and not be stuck with expensive equipment in the event of closing up your restaurant.
Reason #4: You will have the option of buying the equipment at the end of the lease term.
Most leasing services give you the option of either renewing the lease or buying the equipment outright from them at the end of the lease term. This allows you to get the equipment that you need immediately and eventually own it at the end of your term.
What about the drawbacks of leasing restaurant equipment?
It generally makes more sense to lease restaurant equipment than to buy them. But there are some drawbacks in the leasing process. Let’s quickly discuss them.
You won’t own the equipment outright so you can’t use it as collateral or the equity. Other than that, there’s not much of a case for using cash to buy your equipment outright.
Should you buy or lease restaurant equipment? As you can see from this article, it makes a lot of sense to lease as much equipment as you need for your restaurant, especially when it is a new one. Leases can last for multiple years, and require a monthly payment to be made, rather than a large lump sum investment. This makes leasing a perfect solution for a new restaurant owner who is strapped for cash.
However, it is important to educate yourself about the leasing process and having a good idea of how it works before taking a decision on something that is so important to your business. Feel free to contact our experts to learn more about leasing your restaurant equipment.