Is Leasing Medical Equipment a Better Option Than Purchasing?
Businesses of all kinds rely on equipment for effective daily operations. Sometimes when those machines break down, a business faces the loss of revenue. For many medical and healthcare facilities, malfunctioning equipment can mean potential lawsuits. For many businesses, older machinery might present a growing amount of inconvenience. Medical facilities, however, could be held legally and financially responsible if they continue to use obsolete equipment.
There are a number of possible benefits to leasing medical equipment. These include tax benefits, convenient and flexible financing, quick access to modern equipment, and the peace of mind that comes from knowing equipment will be cared for by the leasing company. If you are in charge of or own a healthcare facility, these benefits may have tempted you to try out a lease arrangement. How can you be sure that leasing is really a better choice than purchasing?
You may want to carefully consider the short-term and long-term costs of leasing versus purchasing. If you’re looking at making a purchase soon, you may find that saving up enough cash for that purchase (or even for the down payment) takes a long time and represents a difficult arrangement. Even if you are considering taking a loan to pay for the equipment, this can be a problem, especially for smaller businesses. A lease, on the other hand, typically requires little to no initial cash investment.
When you consider the long-term costs, you’ll want to estimate how long you believe the equipment will last and how much maintenance will cost. It’s possible that the purchase of some machines would make more sense than a lease. Consider adding up the monthly lease payments and comparing that to the ultimate purchase price along with maintenance and repair. If those repairs will be expensive, leasing may be the best option.
Finally, you can use a simple calculation to determine whether leasing or purchasing would be the best option. The first step is to determine how much gross revenue the practice will expect because of having the equipment. The next step is to subtract all related financing costs. Finally, subtract the direct and indirect operation costs. The resulting figure should represent a net profit. If it is a loss, then you’ll know that you need to choose the alternative. At this point, you may also want to consider the fact that owning equipment can have an unwanted effect at tax time. On the other hand, leased equipment counts as an expense.
For many healthcare facilities, leasing medical equipment makes the most sense. With careful consideration, you’ll be able to determine whether leasing or purchasing is best for your situation.