Leasing equipment is an attractive choice for first-timers in food service.
However, like numerous other kinds of leases, you end up paying more more than the three- to five-year lease than the gear would have cost to buy outright.
Roughly, the equipment is paid for by the 24th or 30th payment, but you've got 36 to 60 obligations complete.
Whenever you look at it that way, you're paying for a mighty expensive maintenance policy.
And if your business doesn't make it, you may still be stuck with the remaining lease obligations.
Nevertheless, there are also advantages to leasing.
Usually, it's a way to get the gear financed 100 percent, so to speak, whereas a bank will lend only 85 to 90 percent for gear that you buy and require you to come up with the rest as a down payment.
Seen in this way, leasing leaves you with some cash on hand.
And, since the payments are spread more than a number of years or tailored to your cash flow, they might be less expensive month to month than a bank loan.
Some lessors permit lease-purchase arrangements; others give you the option of purchasing the gear at the end of a lease or turning it in on a newer model and a new lease.
Leasing has tax advantages too: Lease payments usually are deductible expenses, with no interest or depreciation calculations to consider.
Some items are commonly leased because of the accompanying support and support from the company.
Warewashing machines could be leased, and the dealer provides the maintenance and cleaning chemicals.
Coffee-making equipment could be leased, using the coffee and all related support items supplied for a fee.
A representative from the coffee organization replenishes the items and offers regular machine maintenance.
The most prudent course of action is to do a price analysis on a couple of specific pieces of equipment.
To purchase.
Consider total price, interest rate, deposit required, monthly obligations, depreciation, estimated maintenance expenses, and what the gear will be worth at the time you make your final payment.
To lease.
Think about complete cost, interest rate, deposit required, monthly obligations, and estimated maintenance costs not covered by the leasing organization As you read the lease, check that the document contains: a particular length of time the lease will be in effect; the dollar quantity being financed as well as the complete dollar quantity of all the obligations and interest (two very different totals, as you will see); and the quantity of deposit needed.
You should also be clear about the difference between a maintenance contract and a service agreement.
The leasing company is technically not responsible for making sure the gear functions properly.
The manufacturer ought to provide the same warranty or support agreement as you would have if you had bought the equipment.
If the leasing company offers a maintenance contract, it's an agreement over and above the manufacturer's service agreement; it guarantees that maintenance will probably be provided as required.