Cash flow is a massive influencer when looking at these options, as well as if the machinery is part of your capex budget. If you make an outright purchase though, it’s definitely the simplest way to proceed, seeing as there are no overhanging debts. However, it could lead to problems down the road when you need that extra injection for other inventory. An alternative to buying could include leasing packaging machinery or taking out a purchase loan. Both of these routes spread out the cost over an agreed period. However, the overall amount you pay is often increased. Below we will run through the pros and cons of each option.
Pros of Leasing Packaging Machinery
With leasing packaging machinery, there are many benefits. Firstly, you have less expense up-front and instead have easy, predictable instalments, typically on a monthly basis. This makes it easier to budget for the equipment over a longer period of time. Furthermore, packaging machinery is tax deductible, as it’s an operational expense, meaning all payments made for the equipment are written off against the company's tax bill.
On top of this, you don’t have to pay for any maintenance with leasing. This means that if your packaging machinery broke or needed to be repaired, the leasing company would be required to pay for the work needed.
Cons of Leasing Packaging Machinery
However, because you don’t own the equipment, it gives your businesses zero equity. Meaning once you have finished with the goods, there is no potential to earn any money back. Finally, the available length of lease may not suit your needs, and strict terms may force you into paying and keeping something longer than you need, resulting in a possible waste of cash and warehouse space.
