Loan vs. Lease: Which Option Fuels Growth?

When expanding a business, acquiring new vehicles or equipment is inevitable. The question is: how should you pay for them? Both loans and leases have tax implications and cash flow impacts.

Taking a Loan

Pros: You own the asset once the loan is paid off. You can claim depreciation on your taxes (Section 179). Interest paid is tax-deductible.

Cons: Requires a down payment (usually 10-20%). Monthly payments are typically higher than lease payments.

Leasing Equipment

Pros: Little to no down payment required. Payments are treated as a business expense. Easier to upgrade to newer technology every few years.

Cons: You don't own the asset. The total cost over the lease term can be higher than the purchase price.

Making the Call

If the equipment has a long lifespan (like office furniture or heavy machinery), buy with a loan. If it becomes obsolete quickly (like computers), consider leasing.