Compare Leasing vs Buying Restaurant Equipment Costs
Leasing Restaurant Equipment Overview
Restaurant equipment is expensive. Leasing is a great way to acquire everything you need without shelling out a lot of cash. Preserve your startup or working capital for other expenses, particularly the unexpected.
Almost any type of restaurant equipment can be leased, but popular items include dishwashers, ice machines, coffeemakers and computer systems. You’ll want to lease the type of equipment that depreciates quickly, breaks down often or becomes obsolete every few years.
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Leasing Restaurant Equipment Cost
When you lease restaurant equipment, you pay a monthly fee over a period of years – usually three to five. When the lease term expires, you can return the equipment, trade it for newer equipment by signing a new lease, or arrange a buyout.
Your monthly lease payments will be determined by the total cost of the equipment, the length of the lease agreement and your credit score. With good credit, $20,000 worth of equipment will cost you about $450-$500 a month for five years and $50,000 worth of equipment will cost about $1,100 to $1,200 per month for five years.
Leasing Restaurant Equipment Pros
- Lower initial cost – Leases require little or no money down. Get all of the equipment you need without depleting your cash flow.
- Less worry – When you lease restaurant equipment, you don’t have to worry about breakdowns. Maintenance and repairs are typically covered by the lease agreement. You also don’t have to worry about things like depreciation or obsolescence.
- Modern equipment – Leasing is a great way to ensure that you always have modern kitchen equipment. Upgrade your equipment every few years by signing a new lease.
Leasing Restaurant Equipment Cons
- Overall cost – In the long run, leasing is almost always more expensive than buying. Leasing companies charge interest and fees in exchange for buying the equipment and letting you use it.
- Contractual obligations – When you sign a lease, you’re bound by the terms and conditions for the full length of the agreement. Even if your restaurant closes or you stop using the equipment, you will be required to make payments.
Buying Restaurant Equipment Overview
Some restaurant owners prefer to purchase their equipment. You should consider buying restaurant equipment outright if you have significant cash flow and/or anticipate using the equipment for more than five years.
Experts recommend purchasing items that have a long useful life, such as freezers and ovens. You can also write off the depreciation on such big ticket items.
Buying Restaurant Equipment Cost
Outfitting a new restaurant often costs $100,000 to $300,000. And kitchen equipment alone makes up a significant chunk of that – usually anywhere from $30,000 to $120,000. If you don’t have the cash to make the investment upfront, a bank loan is another option to consider. Keep in mind that bank loans are more difficult to obtain than leases, and they often require a significant down payment.
Buying Restaurant Equipment Pros
- Cheaper in the long run – Buying outright is less expensive in the long run than leasing. You don’t have to pay any interest or fees.
- No monthly obligation – When you pay for restaurant equipment outright, you’ll never have to worry about monthly payments. You won’t be adding another fixed cost to your monthly expenses.
- Ownership – When you purchase restaurant equipment, it automatically becomes an asset to the business. Lease payments, on the other hand, are viewed as a liability.
Buying Restaurant Equipment Cons
- More expensive upfront – Restaurant equipment is very expensive. Many restaurant owners or budding entrepreneurs do not have the cash flow to spend tens of thousands or hundreds of thousands upfront.
- Maintenance and repairs – Once the warranty expires, you’re on the hook for any required maintenance or repairs.
- Older technology – When you purchase restaurant equipment, it is yours to until you can afford to replace it. You run the risk of being stuck with out-of-date equipment a few years down the road.