A tough choice of buying or leasing medical equipment is expalined by Magilla.

There are many factors to consider when purchasing or leasing medical equipment.  You must first consider a few factors.  Different companies have different needs and deal with differing circumstances.  The cost benefit of one option may outweigh another.  Some variables to consider are the length of a typical lease (36-48 months), length of time you intend on using the equipment, lifespan of the equipment, tax deductions, maintenance for the equipment, cash flow implications, etc.  Below we will discuss the various things to consider before obtaining medical equipment.

Future Cash Flow

Purchasing medical equipment has large upfront costs.  With leasing, you can spread the payment out for the entire lease term.  This will increase cash flow since you are not putting all your eggs in one basket.  This precious cash flow can be used for other office expenses such as seasonal employees or holiday parties.  However, if you purchase equipment with cash you will ultimately save since you are not paying any interest.

Own the Asset

Another way to view the equipment is as an office asset.  Purchasing new equipment can also increase your practice’s value.  Patients want to go to the best physician or dentist with the latest equipment.  It helps your practice maintain a certain status or image in your community, which in turn adds value to the business.  If a physician or dentist plans on selling their practice, the equipment adds value to the practice and may increase the overall business valuation.  Owning gives you complete control.  If you choose to sell the equipment, you can recover some, if not most, of the costs depending on the type of equipment and how it depreciates.

Taxes

There may be tax advantages if you choose to lease equipment instead of purchase.  For some types of leases, the IRS does not consider them as purchases.  Instead, they are viewed in the eyes of the IRS as tax-deductible expenses.  As a tax-deductible expense, the practice can deduct the payments on the lease from the income, which in turn will reduce the cost of the lease.  On the flip side, if you intend on purchasing the equipment, there may not be any tax advantages.  The only tax advantage may be adding the depreciation back as income.  As always, consult with your CPA or tax professional for professional guidance.

Repair and Maintenance Costs

Repair and maintenance are covered under warranty for the first two to three years on most medical equipment.  However, after the first few years, most equipment will start to break down.  You may be able to purchase an extended warranty plan but that will be much more expensive.  All equipment have a lifespan.  Just like a car, it costs money to extend the life of a piece of equipment.  Another factor to consider is if employees mishandle or damage the equipment. Ultimately, the company will eat those costs.

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