Leasing suits equipment that goes out of date before it wears out, such as diagnostic equipment and computers, or that the business wants to replace on a cycle. Financing suits equipment the business will use for most of its life, such as excavators and kitchen equipment. The total dollar cost and what happens at the end of the term decide between them.
An article from Goldpeak Advances in El Centro, California comparing equipment loans and leases for clinics and contractors, with a worked example and the questions to ask about any quote.
Is It Better to Buy or Lease Equipment? The Short Version for El Centro, CA Physician Practices
For a physician practice, the short version: buy or finance equipment that stays useful for years, such as exam tables and sterilizers, and consider leasing equipment that changes with technology, such as imaging and computers. A lease can make replacing the unit at the end of the term simple; a loan leaves the practice owning it.
Physician offices with employees in Imperial County, CA numbered 88 in the 2023 County Business Patterns, each with its own mix of long-lived and short-lived equipment. See medical practice loans.
Cash on hand plays a part too. Financing may ask for a down payment, while some leases ask only for the first and last payments, which keeps more cash in the practice for payroll and supplies. That difference matters most in the first months after a large purchase, when the new equipment has not yet changed the practice's collections.
Equipment Finance Agreement vs. Lease: Which Fits an El Centro, CA Contractor?
An equipment finance agreement is a loan in substance: the contractor owns the machine and pays it off over the term. A lease keeps ownership with the lessor, and the contractor pays to use it. A lease with a nominal purchase option at the end works much like a loan; a fair market value lease works more like a rental.
Illustration only, invented figures: a contractor compares a $64,000 machine financed over 60 months at an annual rate of 9.5%, a total paid of about $80,647, with a 60-month lease at $1,290 a month, a total of $77,400 with no ownership at the end (our arithmetic). The lease costs $3,247 less in payments but leaves the purchase option open.
The comparison is not finished until the end of the term is priced. If the contractor would buy the machine at the end of the lease, add the purchase price to the lease total; if it would return the machine, add any return conditions, such as hour limits or repairs, that could carry a charge. Only then do the two totals measure the same thing.
How Do Equipment Leases Work? An Example With Diagnostic Equipment
Equipment leases work through three numbers: the monthly payment, the term and the end-of-term option. For diagnostic equipment, read whether service is included, whether the lease can be upgraded to a newer model mid-term, and what it costs to return or buy the unit at the end.
Some leases include insurance or maintenance requirements; read them before comparing totals.
Diagnostic equipment also comes with software and service. A lease that bundles service can protect a clinic from large repair bills, but the clinic should know the service price inside the payment, because a separate service contract might cost less or more. Ask for the lease quote with and without service.
Lease or Buy Equipment for Business When an El Centro, CA Contractor Needs Mini Excavators
A contractor deciding whether to lease or buy mini excavators can start with how often the machine will work. A machine used on most jobs every month earns its keep as a purchase; one used a few weeks a year may cost less to rent by the job. The 2023 County Business Patterns puts the count of Imperial County, CA construction firms with a payroll at 162, including builders, heavy and civil engineering contractors and specialty trades.
See construction business loans and equipment financing.
Utilization is easy to estimate from the contractor's own schedule. Count the weeks over the last year when a mini excavator was on a job, owned or rented. If the count is high, the rental bills already approach a payment; if it is low, renting by the job leaves capital available for payroll and materials between pay applications.
Questions to Ask About Any Lease or Equipment Loan Quote in Imperial County, CA
Questions to ask about any lease or equipment loan quote:
- Added up, what do all the payments come to by the final month?
- Who owns the equipment during and after the term?
- What does the end-of-term option cost?
- Are service, insurance or other costs required?
- What happens if the business wants to pay off or upgrade early?
With those answers, compare the two on total dollar cost and what the business has at the end.
By Goldpeak Advances · Updated
