Lease, Hire or Buy – What is best for Capital Equipment?

Buying workshop equipment is rarely an easy process. Most people can’t afford to buy the equipment outright in their lifetime, so often look for other options that can take the financial pressure off – like financing or a second hand equipment purchase. But how do you know which option is right for you? With the interest and hidden costs of many finance solutions, or buying second hand equipment that may not be reliable, many workshop owners experience a time consuming and frustrating journey.

Leases have given many garage owners an opportunity that’s both practical and cost effective. As a two way agreement between you and a finance company, employers are given a fantastic option to purchase new equipment suitable for their needs and within a managable budget. It’s a solution that’s helped many people get the equipment they want at a price they can afford.

But how does a Lease compare with other buying options? Let’s take a look!

Lease Hire vs. Finance

Historically, for many garage owners, taking out a loan to finance new or used equipment tended to be a most popular option. Most people opted for either a business loan or a personal loan from the bank both of which require about the same amount of paper work and credit history to get it over the line. Depending on your credit history, the value of the purchased equipment and the type of loan you take on, you may have to fork out a deposit in advance as well.

Although purchasing equipment using finance can be the most familiar option it does of course have interest rates attached to it and these vary significantly from loan to loan so that they can end up costing you a fortune down the track. On the other hand, a Lease still has an arrangement with a finance company but it’s much more transparent than a finance loan – which can seem a lot more attractive than what it actually is.

Lease Hire vs. Buying Outright

Whilst buying equipment outright can be a feasible solution for garage owners who are willing to accept the risk of second hand equipment, it’s not always practical for a brand new. Unless you have been on a strict saving plan for years, have cash in hand at the bank or earn a significant above-average return, it’s rarely a practical plan for the average person.

Buying equipment outright with the cash you have saved comes with one obvious advantage though – it’s yours outright with no more to pay and nothing further to owe. It also has a notable downside – unless you have significant additional funding available to hand at the bank, then a future additional cash requirement within the business could cause cash flow issues – therefore it doesn’t always make a lot of financial sense to buy outright and to ‘dig in’ into your ‘rainy day’ savings account.

Lease Hire vs. Mortgage Redraw

It’s the incredibly low interest rates that tempt homeowners to redraw additional home loan payments to buy capital equipment. The problem? Most mortgages are likely to be a 20 year term (or more!). If you add the cost of the equipment to your mortgage and pay this pack over the same 20+ year period then a £30,000 investment can easily turn into a £55,000.

Lease Hire vs. Lease Purchase

These are the most common methods of purchase for large items of high value capital equipment. Sometimes equipment purchased on a hire purchase agreement can sometimes be confused as a ‘equipment loan’. Under either a lease or purchase agreement, the finance company purchases the equipment on your behalf and you will gain the use of that equipment in return for regular payments.

At the end of a lease hire contract, you have the option to buy the equipment at a pre-arranged rate whereas with a lease purchase agreement you will have already paid the VAT up front as a deposit to the supplier with the ownership of the equipment being automatically transferred at the end of the contract term. On paper this looks more attractive – but only as you will have reduced the initial purchase cost by 20% (the VAT element).

Either way around is “as broad as it is long” as far as ownership of the equipment is concerned however, since the lease hire gives the facility to maintain the initial deposit to zero; in most cases these are usually the most cost-effective way to purchase.

Want to find out if a Lease Hire contract is right for your equipment purchase? Contact us at GETECH Garage Equipment for more information on 0844 800 9785.

More information on our lease packages can be found here.


For more information on GETECH call during office hours, visit http://getech.org.uk or mail info@getech.org.uk.

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