One of the big decisions that many businesses face when looking at new packaging equipment – Do I lease or purchase my packaging machinery?
Cash flow is a massive influencer when looking at these options, as well as if the machinery is part of your capex budget. If you make an outright purchase though, it’s definitely the simplest way to proceed, seeing as there are no overhanging debts. However, it could lead to problems down the road when you need that extra injection for other inventory. An alternative to buying could include leasing packaging machinery or taking out a purchase loan. Both of these routes spread out the cost over an agreed period. However, the overall amount you pay is often increased. Below we will run through the pros and cons of each option.
Pros of Leasing Packaging Machinery
With leasing packaging machinery, there are many benefits. Firstly, you have less expense up-front and instead have easy, predictable instalments, typically on a monthly basis. This makes it easier to budget for the equipment over a longer period of time. Furthermore, packaging machinery is tax deductible, as it’s an operational expense, meaning all payments made for the equipment are written off against the company's tax bill.
On top of this, you don’t have to pay for any maintenance with leasing. This means that if your packaging machinery broke or needed to be repaired, the leasing company would be required to pay for the work needed.
Cons of Leasing Packaging Machinery
However, because you don’t own the equipment, it gives your businesses zero equity. Meaning once you have finished with the goods, there is no potential to earn any money back. Finally, the available length of lease may not suit your needs, and strict terms may force you into paying and keeping something longer than you need, resulting in a possible waste of cash and warehouse space.
Pros of Purchasing Packaging Machinery
The biggest advantage of purchasing packaging equipment, is the ownership factor. This is especially true if the equipment has lifetime value and does not outdate. Owning the machine gives your business the responsibility to maintain it. This is in fact a huge advantage, giving you the ability to adapt the machinery to suit your needs, without having to wait or gain permission. You have complete control over what you receive because you are not limited to a leasing companies’ stock. Therefore, if you are keen on a particular brand or make, you have the ability to purchase exactly that.
Cons of Purchasing Packaging Machinery
As always, there is a catch. Seeing as one upfront cost is a relatively big ask for a company, it may even force you to go for a cheaper option. Therefore compromising the quality of goods you receive. Another disadvantage to purchasing packaging machinery, although it may be minor, is the fact that your business would also be liable for keeping the equipment in good condition. In most cases, this wouldn’t be a worry, but if there were any unexpected damages, your company would need to pay for the repairs.
You’ll want to ensure you have considered all details of both options before you make a decision on what’s best for your business. Overall, purchasing packaging machinery would give your business assets, whereas leasing would mean healthier cash payments. If you would like to discuss what this means for your business, feel free to speak to one of our experts.