Figuring out whether it’s a good time to buy new equipment can be tough, especially if you are in a high-uncertainty field. Many contractors prefer to lease anything that might be a single-job need, but it is not always easy to see when that will be the case. That means you need a firm set of criteria to help you decide between equipment financing for a purchase or leasing to fill a limited-time need.

Short Operating Life? Lease To Upgrade

Some machines have a short enough path to obsolescence that financing them on a medium-term equipment loan would result in a loan that will be around longer than the collateral. Those situations are ideal for leasing because even if you will need to keep a machine like that one, you can use lease renewal as an opportunity to upgrade to a current model.

Machines for Core Business Functions Are a Buy

There are some situations where leasing an important piece of machinery might be in order, but those situations are defined by either temporary needs or financial circumstances. When it comes to equipment you will use for basic services that most of your clients need, a purchase is best. Financing that purchase gives you a shorter route to a return on your original investment, along with the assurance that you will have an income-producing asset that keeps earning for you well beyond the loan payoff date.

Machines for Single Jobs? It Depends

It’s pretty common for a client to require something that you are not yet set up to support. Whether it is because it’s a well-known service that has niche demand or because there is a new trend in the industry can determine whether you should lease or purchase.

Using equipment financing to purchase the tools you need to offer new services in line with a trend means being able to use this first client’s order as an investment in the future popularity of your new service. Niche demand means it could be years before you are asked to do another job that needs these tools. The decision gets a lot easier when framed that way.

Always Consider Your Current Financials

There are times when your immediate financial needs will make the right choice counterintuitive. Sometimes that is because you are dealing with a known quantity like a temporary replacement for a machine that goes down. Other times, it’s because your long-term financial strategy dictates a different move. Always review your own plan when making the final call about leasing or financing.