If you’re in manufacturing, you don’t need to be told how competitive the business can be or how resource-intensive it is to keep up with the services and offerings your clients want. When it comes to electroplating and other metal finishing processes, the equipment is expensive and technical enough that most manufacturers seek out businesses like yours to handle that part of the process. As a result, when you need to upgrade or replace a core item like your crane lift or one of the anodizing tanks, you need to do it right away. Leasing can be a good way to get that item fast, but is it better than buying? For large items with long operating lives, the answer is simple. Buy it.
Why and When To Purchase
There are circumstances where leasing is advantageous, but when the operating life of a machine is over a decade, that’s rarely the case. The reason is simple. When investing in a major item like your new anodizing tank, the point of the process is the time you get to use the machine for the cost of maintenance. If the loan is only for five to seven years but the tank could last two decades with the right care, you’re talking about paying for its financing for just a quarter of its life. The return on that investment is huge, especially since you’re probably going to be seeing some of it while you’re still paying down the purchase. It takes some time to recover the cost of your down payment for sure, but it’s usually nowhere near the full life of the equipment loan.
When Should You Lease?
Leasing is the most cost-effective option for equipment when you need it immediately and you can’t wait for a loan to close because it would disrupt your business, but even then it might be better to go with a short-term rental while you set up the loan. It’s also a great idea when you don’t have the credit for a loan and when you might want to upgrade out of the machine before it’s paid off, as is often the case with mobile phones, laptops, and other computing devices.