Questions > Buy or Lease Restaurant Equipment?

snowfreek007 May 24, 2010 at 4:55 am

buy. this way if it breaks you can’t get sued or have to pay double to get it fixed

maxon475 May 24, 2010 at 5:17 am

Like in every other bus. leasing is an expense thus tax deductible. Own it ,it’s an asset . Opening a small bus. it might be a better idea ,at the least in the onset to lease the equip.

mktgurl May 24, 2010 at 5:53 am

Depends on the equipment needed. Leasing equipment has certain advantages. You pay for equipment only for the time you use it. When your lease is up, you get a brand-spanking-new piece of equipment with all the latest gadgets by signing a new lease. And when a piece of equipment breaks, it’s not your responsibility to fix it.

Things shouldn’t change between the time you talk to your salesperson and the billing department sends you a bill, but sometimes they do. Spell out all the financial details in the agreement so you’re not surprised when the bill arrives. Get it in writing and check your invoices.

Also, you don’t have to buy equipment new, you can buy it used. The link noted below has examples of what types of equipment are better to lease and which ones you are likely to buy.

Some restaurant supply resources:
http://www.instawares.com/
http://www.zesco.com/
http://www.bakedeco.com/

werd2god May 24, 2010 at 6:07 am

It certainly depends on the terms of the lease and the cost of the equipment. Both provide tax benefits:
-Lease payment is a monthly deductible expense
-Buying it outright will let you depreciate the asset over its useful life (IRS chooses length of depreciation for the asset)

Personally, I’d rather buy less expensive, but still high quality, used equipment than have the stress of knowing the asset is leased and you will be responsible for the balance regardless of how well the business does. Not to mention you never actually own the asset, though you can buy it at the end of the lease.

There are numerous used restaurant equipment suppliers you can buy from. Another option is buying the equipment of a business that went belly up, an asset sale, and just use their equipment. Go to bizben.com (Only CA) or bizbuysell.com and look for restaurant asset sales.

If you can get a restaurant that catches on, you can definitely make good money, and much of it is cash (nudge, nudge).

For more information I’d go to an EA(Enrolled Agent) or CPA to get more details as it will be worth the cost in the long run. I’d go to an EA, even though you have probably never heard of them and they often provide better advice than a CPA at half the cost. EA is a designation given by the IRS to ex IRS workers and people that pass a certain test. They specialize in tax issues and are often better at taxes than CPA (no need for Audit, Financial Accounting, Regulation, biz environment).

Good luck with your entrepreneurial endeavors.

libby May 24, 2010 at 6:56 am

It depends on how much equipment you need and what kind. If it’s only 1 or 2 items, I’d probably initially lease it until you had a good grasp of what to expect business wise. Increase profits with a professionally designed menu! http://www.designrestaurantmenus.com (under construction)