Leasing is an increasingly popular option to a cash purchase or term financing. Doing your homework will help you choose the right option for your operation. Here are a few things to consider.

Financial situation
Do you have the capital to buy the asset or make a large down payment? If your cash flow is strong and you have a low debt load, purchasing may be the way to go. On the other hand, leases are often available with no money down, which frees up your cash reserves and lines of credit.

If you’re expanding your operation, leasing might free up your capital and credit for other business purchases. If your business plans don’t depend on the most up-to-date technology, purchasing used equipment that’s well-maintained might be the most cost-effective approach.

If you plan to own the asset for at least five years and it will maintain resale value, purchasing makes sense. You may be better off to lease if you’re looking at equipment or machinery that will quickly become obsolete.

Always ask about upgrade policies if you’re leasing technology that evolves rapidly. Without it, you have no flexibility if you decide you don’t like the equipment you’ve leased. With a traditional loan, you’re generally free to sell and pay off the loan any time, but it can be very difficult to get out of a lease mid-term.

Run the numbers
It’s important to understand the total cost you’ll incur over the lifetime of a lease or term loan. There are plenty of online calculators to help you run the numbers. Don’t forget to factor in things like security deposits, administration or documentation fees, GST and PST (if applicable). If you’re still not sure, talk to your financial or tax advisor.

We offer a wide range of business loans and work with our partner Concentra Financial to offer leasing. If you’re interested in learning more about either option, we'd love to help.

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