For Kiwi businesses looking to grow, stay competitive, or simply run efficiently, one key decision stands out: should you lease or buy your equipment outright? Whether you need vehicles, machinery, or specialised tools, the choice between leasing and buying can have significant financial implications.

If you’re weighing up your options, we’re here to help. Here is an honest look at the pros and cons of leasing vs. buying equipment (and how a strategic loan could support either route for your business).

Leasing Equipment: The Pros and Cons

In the toss-up between leasing vs. buying equipment, leasing involves applying to a lender who will purchase a given piece of equipment and lease it to you, rather than supplying the funds for you to buy it outright. This allows the lender to retain the equipment for future lending to other businesses, making it an appealing option for both parties.

Pros

•         Lower upfront cost. Rather than paying the full purchase price, you’re spreading the cost across manageable monthly payments.
•         Access to the latest technology. Leasing makes it easier to upgrade equipment regularly, which is useful if you’re in a fast-moving industry.
•         Maintenance and repairs included. Many lease agreements include maintenance and service clauses, taking the burden of upkeep off your plate.
•         Tax deductibility. In many cases, lease payments are considered an operational expense and may be fully tax-deductible (but always chat with your accountant about the specifics).

Cons

•         No ownership. At the end of the lease term, you don’t own the equipment unless you pay a buyout fee.
•         Potentially higher long-term cost. While leasing often offers lower monthly payments, the total cost over the lease term can exceed the purchase price of the equipment if you choose this as a long-term solution.
•         Contract limitations. Lease agreements may come with usage restrictions, penalties for early termination, or limits on customisation (so always read the fine print and chat with your lender).

Buying Equipment: The Pros and Cons

Between leasing vs. buying equipment, the latter involves applying to a lender for the funds to outright buy a piece of equipment and paying that amount back over time. Depending on the loan structure, the asset itself might act as the collateral for the loan’s security, which protects the rest of your business’s assets from being reclaimed should the loan default.

Pros

•         Full ownership. Buying equipment means the asset is yours to use, modify, and keep for as long as needed.
•         Greater flexibility. Ownership gives you full control. Contractual terms do not limit you; you can adapt the equipment to suit your specific operations.
•         Long-term cost savings. While the upfront cost is higher, buying can be more cost-effective in the long run if you plan to hold onto the equipment for an extended period.
•         Potential for financing. If buying outright isn’t viable, equipment loans are a great alternative.

Cons

•         Higher initial expense. Purchasing equipment typically requires a larger upfront investment. This can be managed with an equipment loan in some cases.
•         Depreciation risk. If the asset becomes obsolete or loses value quickly, your investment may not yield a return on resale.
•         Maintenance responsibilities. When you own equipment, you’re responsible for all maintenance and repairs, and those costs can add up progressively.

Across the board, it’s clear that the toss-up between leasing vs. buying equipment has many specific pros and cons to offer. It’s essential to remember that each lending or equipment finance contract is unique, so speak candidly with your lender and always clarify the terms before signing.

Which is Best for You?

Leasing makes sense when…

•         You need equipment for a short-term project or seasonal use.
•         You operate in a fast-changing industry where technology becomes outdated quickly.
•         You want to avoid tying up capital in depreciating assets.
•         You prefer fixed, predictable monthly expenses for budgeting purposes.

Buying makes sense when…

•         You’ll use the equipment long-term and want to build equity.
•         The equipment is unlikely to become obsolete soon.
•         You have access to financing or capital to fund the purchase.
•         You want full control over the equipment, including customisation and resale.

As you can see, leasing vs. buying equipment is a complex choice, and there is no one-size-fits-all answer. The right decision depends on your budget, the nature of your business, and perhaps most importantly, how long you plan to use the equipment.

If you are unsure which path to take, the best course of action is to contact a lender who can offer leased equipment or financing to purchase your equipment outright. GVK Finance is one such lender, and as a trusted advisor to many Kiwi businesses, we would be happy to walk you through the pros and cons for your particular setup.

Ready to invest in your business’s future?

At GVK Finance, we have a genuine interest in understanding how you run your business, so we can help match you with the ideal lending structure to keep your operations moving. We’re more personal than other lending companies, have the industry knowledge to help you make the call, and we’re proud to be a secure and trusted option in the region.

Get in touch with our team for help today.