Recently, the Financial Accounting Standards Board issued an update that will significantly change the way in which lessees and lessors account for leases. The change, which takes effect in 2020, will require businesses to recognize lease assets and liabilities on the balance sheet and to disclose key information about leasing arrangements.
However, for the time being, your manufacturing business will still face the quandary over whether to buy or lease manufacturing equipment.
The best place to start is with a calculator to crunch the numbers both ways, as a lease and purchase. Visit Equipment Buy vs. Lease Calculator for a quick and useful resource.
Primary considerations under either method should include the value of tax deductions. When buying, estimate the resale value at various points in time. But also consider the revenue generated by the equipment, its useful shelf life or longevity and the overall cost of use. Knowing how long you intend to use the equipment is a critical factor as well.
When leasing, it may be possible to negotiate a purchase option if you intend for long-term use of the equipment. Under this scenario, a portion of your lease payment could be credited toward the purchase price.
Do you have questions about buying versus leasing equipment, or other manufacturing challenges?
For more information, please contact Teresa Knippel at 651-407-5823 or firstname.lastname@example.org.
Teresa Knippel is Director, Client Manager, and Manufacturing Industry Team Leader at Redpath and Company. She has been with the firm since 2015 and is focused on establishing long-term advisory relationships with clients, including comprehensive tax planning for income tax, gift and trust, and wealth transfer for high net worth and/or business owner clientele. Teresa has provided public accounting services since 1991. Teresa can be reach at email@example.com or 651.407.5823.More posts by Teresa Knippel