Certain pieces of equipment, machinery and technology are essential to the operation of your business. Whether it’s the chair or autoclave for a dentist’s clinic, the rehab equipment used in an allied health practice, the specialised computing and plotting hardware architects rely on, or the precision machinery driving a high-tech manufacturing line.

But when a critical business asset is required, should you buy it outright or lease it and pay for it in manageable instalments?

To buy or to lease? That is the question.

Buying new equipment, plant, machinery, or technology can be a significant investment.
So it’s essential to understand the pros and cons of each option.

Let’s explore both approaches — with examples relevant to the sectors Everalls commonly works with.

Buying: the pros and cons

Pro: You own a tangible business asset and have full control and long term use

When you buy an asset outright, it appears on your balance sheet and contributes to the value of your practice or business. And, when you own the asset, you’re not constrained by a lease term or usage limits. If your circumstances change, you can also sell the asset and recoup some value.

Pro: You can depreciate the asset for tax purposes

In some years, may be eligible for accelerated depreciation concessions and/or the 100% instant asset write-off. This gives you a higher tax deduction in the earlier years of ownership (at the cost of a lower tax deduction in the later years).

Pro: You can claim 100% (if no private use) of the GST Input tax credits up front

This can provide a very handy cash flow boost.

Con: Large upfront cash outlay

Buying can require a significant cash outlay upfront — which can divert funds from other priorities like hiring, marketing, or growth.

Examples:

• A young dental practice is tying up cash in equipment instead of marketing for patient acquisition.
• A small architecture firm is choosing between hardware upgrades and staffing capacity.

Con: You may need additional financing

If you don’t have the cash on hand, you may need to take out a loan or use other equipment finance such as a Chattel Mortgage. Finance arrangements add to liabilities and reduce balance sheet flexibility.

Leasing: the pros and cons

Pro: Lower upfront cost

Leasing allows you to access the asset without having to purchase it outright.

Examples:

• A dentist leasing a $160k digital scanner to preserve cash flow.
• Architects leasing high-end computers with regular upgrade cycles.
• Manufacturers are leasing automation equipment that may become obsolete quickly.

This makes leasing particularly attractive for start-ups or growing practices that want the equipment now but need to maintain liquidity. You may not own the asset outright, but you still have full use of it for the period of the lease. Leasing can also therefore be handy for equipment that has a short term life/needs regular updates – eg a car that gets traded in every 3 years or IT equipment that only has a short useful life.

Pro: Payments can be spread out

Leasing converts a major capital purchase into predictable equal monthly expenses. But it’s important to note that you don’t get to claim the GST input tax credits up front. Instead, you get to claim back 1/11th of each lease payment. And, instead of getting a tax deduction for the depreciation (and interest where financed), a business claims the whole lease payment (net of GST) as a tax deduction. This evens out the ITCs and tax deductions over the term of the lease.

Con: You may not own the asset

Depending on whether the lease is an operating lease or a finance lease, you may or may not end up with the asset at the end of the term, and if you do, there is usually a residual payment that needs to be made or refinanced. This is OK where the asset will be replaced/upgraded every 3-5 years like cars or IT equipment. But, outright ownership may be more appropriate in industries where the asset:
has strong long-term value
is used beyond the typical lease period
integrates into practice goodwill (e.g., some dental equipment)

Con: Total cost may be higher

Obviously, any interest and/or leasing charges will result in you paying more than the asset’s original purchase price over time.

Con: Risk of losing access if payments lapse

If you can’t keep up your lease payments (due to poor cashflow for example) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can be highly disruptive to your ability to operate. In this respect, leasing is a more risky prospect, albeit an easier option for businesses with less cash to splash.

Talk to us about what’s right for your business.

There’s no “one size fits all” approach.  The best decision depends on your:

• cashflow
• tax position
• equipment life cycle
• appetite for future upgrades
• strategic plans
• industry dynamics

We can help you:

• Model the cashflow impact of buying vs leasing
• Confirm tax implications and deductions
• Assess how each option affects your balance sheet
  
• Align the decision with your broader business and personal wealth goals.
  

Our role is to look at your entire situation holistically and help you make the choice that supports both your immediate operations and your long-term strategy.

Speak to the team today to determine the right option for your circumstances.