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AAOS Now

Published 10/1/2014

Lease or Buy?

Looking to update or expand your practice? If so, you may also be weighing whether to lease or buy equipment. The decision is not always an easy one to make because the two acquisition options have both advantages and disadvantages.

For example, leasing generally requires a minimal down payment (or none); it may protect the practice against obsolescence; and payment may be spread over a longer period of time. So, upfront costs are lower, which frees money to be invested elsewhere. Down the road, the cost of upgrading leased equipment may be lower than purchasing new.

Factors to consider when thinking about leasing equipment include the following:

  • How long is the lease?
  • Is the lease long enough to cover the life of the equipment or the time you need it?
  • What will be the cost if you want to purchase the equipment at the conclusion of the lease?

Buying is more straightforward. Simply determine what is needed and look for the best price (or combination of price, warranty, and service). The entire cost of the equipment can be deducted from taxes in the first year or spread out over several years. So purchasing provides tax advantages with lower monthly costs, but it may restrict the practice’s financial operations.

Determining whether to lease or buy space is also an issue. If you own the office and are considering leasing space to an allied healthcare professional or business, be sure you are not in violation of Federal Anti-kickback provisions.

Making the correct lease vs. buy decision may be key to a business venture’s long-term success. Once a decision has been made in this regard, be sure to review the terms of the lease or purchase in detail to be sure that the financial and operational consequences are clear.