To Buy or to Lease, that is the question!

Should I buy or lease my ice machine??

This is a question that we go over with clients on a regular basis, especially when it comes to ice machines.  Ajax offers Full Service Leasing on commercial ice machines and select styles of  commercial coolers and freezers.  We decided to do some research and share the results on the question of buying or leasing.  Here’s what we found after some research along with some insights from Ajax.

Enjoy and remember to call Ajax Refrigeration when you’re ready to buy or lease commercial ice and refrigeration equipment.  Our full service ice machine leasing program is second-to-none and we can offer the same benefits on some commercial refrigeration units as well!!  check us out at www.ajaxice.com

Benefits of Leasing

Saves Money. Leasing large commercial equipment, like a commercial grade dishwasher, will help you save your start-up cash for other areas. Instead of paying three thousand dollars for a dishwasher, you could use that money toward your first food order, or your first payroll or your marketing budget. Read more about getting ready to open a new restaurant.

No Paying for Repairs. If the equipment breaks, you don’t have to spring for repairs.

Easier to Upgrade. When the lease on your commercial restaurant equipment is up, you can get a new model if you choose to renew.

Some Commercial Equipment is Better for a Lease Than Others
Certain pieces of restaurant equipment are better suited to leasing, because of their short lifespan and wouldn’t be worth the investment to buy new.
These items include:

Ice Machines
• Dishwashers
• Coffeemakers
Coolers

What to Know Before You Lease Restaurant Equipment
Of course, with any lease, you don’t own the equipment and you will have a weekly or monthly bill. You will also need to sign a contract, which you should review (or have your lawyer review) very carefully, to ensure you understand it and agree to the terms.

Leasing

Pros:
There is less expense up-front with leasing because you have easy, predictable payments. You don’t have to deal with one large lump sum to purchase what you need, making it easier to budget for the equipment over a longer period of time.

Leasing is often 100% tax-deductible as an operational expense under the 179 IRS Tax Code.

Leasing is flexible and offers more options when it comes to the type of equipment you get. You aren’t as restricted by high up-front costs or other hesitations to try something new that may help your business.
With leasing, you don’t pay for maintenance. If something breaks or has issues due to normal wear and tear, the leasing company is in charge of fixing the equipment.

From Ajax…
All benefits of Ajax Full Service Leasing, including removal of the old unit, delivery and installation of the new unit, service repair visits whenever the machine has a failure seven days a week and quarterly PM service.
Hassle Free ice for a few dollars a day

Cons:
You usually pay higher costs over time than you would if you paid up-front. Most leasing options require interest to be paid as well. (No interest on Ajax lease).

Since you don’t own the equipment, it gives you absolutely no equity. You won’t have the option to sell the equipment once you are finished with it, so there is no potential to make any money back.

The available length of lease terms may be longer than you need. Strict agreements may force you to pay for and keep a piece of equipment for a longer time frame than you require, resulting in wasted funds and space.
Availability of products may be limited depending on the stock of the leasing company. Your choice of brands or models could potentially be out of stock or not carried at all, so you could have to settle for something else.

Buying

Pros:
You will own the equipment, so you can make any alterations necessary. You won’t have to wait for issues to be addressed or need permission to make changes.

You have the option to sell the equipment when you are finished with it, allowing you to recover some of the cost.
Tax incentives under Section 179 of the IRS Tax Code are larger for purchasing office equipment but have limits. If your equipment doesn’t qualify under Section 179, you may be able to leverage a depreciation deduction for the equipment you have purchased for your business.

Buying is easier because you don’t have to deal with agreements and contracts. You simply pick out what you need and pay for it. This works great for smaller equipment that is easy to store, as well as equipment that has a long life.
You have complete control over what you get because you aren’t limited by a leasing company’s stock. If you want a particular model or brand, you have the ability to order exactly that.

Cons:
You will have a higher initial cost as opposed to lower monthly payments that may be easier to budget. It may be difficult to pay for costly equipment all at once. Higher initial costs may keep you from buying exactly what you want and may force you to settle for a lower-cost option.

For technology that is outdated quickly, you are stuck with it because you own it. You then have to decide if it is worth it to continue to use it, repair it, store it or sell it.

You are responsible for all maintenance, including costs. This can get pricey depending on what issues you encounter, and making repairs is not always simple. You could potentially be burdened with broken equipment that you can’t return or sell. Keep an eye on the product warranty to see if it covers repairs and for how long.

From Ajax…
Ice machines are finicky and can become expensive to repair.
Manufacturer’s warranties do not cover maintenance issues, which is the #1 cause of ice machine failures (based on Ajax service data).

Warranties do not cover nights and weekends and usually the ice machine fails on Friday right before the busy rush.
You’re on your own and don’t have Ajax staff to provide support

Determining costs for equipment through either method should include considerations of tax deductions and/or the potential resale value. Consider the potential revenue derived from using this equipment, how quickly the equipment will be outdated, the size of the equipment and the overall costs. Each decision regarding equipment leasing or buying should be made carefully to best fit your company’s situation and needs.

Ajax leases all sizes of commercial ice machines.

Owning vs Leasing

Owning the equipment your business uses to operate gives you the highest degree of control over how you manage your resources. You can sell the equipment at any time or continue to use the equipment for years if that use remains productive.

With a lease, you trade some of that control for more simplicity in the operation of your business. With a lease, the equipment is delivered, you make the lease payments and the equipment is taken away at the end of the lease. You spend little or no time managing the equipment compared to if you owned the equipment.

Lower Upfront Cost when leasing
When you lease capital equipment, it costs you just the first lease payment and some fees to get the equipment you need for your business. If you buy you must either pay the full cost or, if you finance, the down payment for regular financing of commercial equipment will be significantly more than the lease start-up costs. Even if you have enough money to buy the equipment, leasing allows you to hang on to that cash and keep it ready for other uses or needs in your business.

Business Expensed Payments when leasing
Lease payments on business equipment can usually be used as a deductible business expense. The tax savings from claiming the leases on your business taxes can more than offset the finance costs associated with the lease. If you buy the capital equipment, you can depreciate the value following the tax rules and if you finance, the interest would be deductible. The buy option increases the complexity of your tax return, and in the best case the tax savings will just equal the result from deducting lease payments.

And finally…

Benefits of Leasing Equipment: When leasing is the best option
Stocking a restaurant kitchen can be expensive.

As you get ready to open a new restaurant, something to consider is whether or not to lease some of the commercial kitchen. While you probably wouldn’t consider leasing a stove or a dishwasher for your home kitchen, leasing for a commercial kitchen often times makes the most sense. When outfitting a new restaurant kitchen it is important to remember the appliances you choose will get a lot more wear and tear than those of an average home kitchen.

Factoring the cost of repairs and the time it takes to fix something, it is sometimes better to lease equipment rather than buying it. Leasing can save you a lot of start-up money and come with better/longer warranties than the pieces of equipment you buy outright.

 

Another satisfied customer! Ajax values relationships!

Sources:

https://www.thebalancesmb.com/benefits-of-leasing-equipment-2888869
BY LORRI MEALEY Updated March 09, 2018

quickbooks.intuit.com/r/office-and-equipment/pros-cons-leasing-vs-buying-equipment/

http://smallbusiness.chron.com/would-choose-lease-capital-item-versus-buying-63663.html

 

By Christopher Montigny for AJAX Refrigeration.  6-6-18.

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