Buying vs. Leasing a Storage Container
No matter how successful your business, you still look for the most cost-effective solution when it's time for new equipment. If you're looking at getting a new – or new-to-you – storage container, one of the options you have to consider is the comparative value of buying versus leasing.
Unfortunately, there is no definitive answer, as the right choice depends on your own unique needs. For some, buying is always preferable, simply because they know that, in the long run, it costs more to lease. For others, leasing is the only way to go, especially when it comes to electronics and big-ticket items. The most common considerations when making your decision include cash flow, managing expenses, costs, inventory, and long-term expectations surrounding your storage needs.
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The Pros and Cons of Leasing a Storage Container
Leasing storage units offers numerous benefits, as well as a few cons. Consider both carefully when deciding whether leasing works best for your business.
Advantages of Leasing
The main benefits are financial, as leasing does not require a large initial investment, or force you to use valuable credit. You keep healthy cash reserves intact and save your credit at the same time. If your business is not yet profitable, you don't even lose that depreciation credit on your taxes, since you can't claim it yet anyway.
Many businesses also appreciate the easy budgeting offered by leasing, as you get a set, monthly payment for X number of months (depending on your lease terms). You may even get a tax break, since lease payments typically count as a business expense, but check with your accountant to be sure. With a capital lease (the kind that lets you purchase the item at the end of the lease), you may even be able to claim depreciation. Again, check with your accountant to be sure.
Finally, if you know that your storage needs are finite, leasing may save you a significant amount of money. A new unit ranges between $3,000 and $6,000 on average, depending on size. You can lease one for around $100 to $150 a month (again, depending on size). If you know you only need it for a year, those savings are considerable.
Disadvantages of Leasing
If you keep it for long enough, any leased equipment ends up costing more than it would if you purchased it outright. Sometimes, the difference is considerable. Basically, if you lease the unit for more than 30 months, you'll spend more than you would have if you bought it outright. You also lose the ability to sell the unit when you no longer need it.
For certain types of equipment, those cons are easily outweighed by the fact that leasing allows you to upgrade to the latest technology. Of course, that doesn't really apply to a storage unit, so you lose one of the biggest leasing pros. You don't have to worry that your storage container will become obsolete the way computers do, or that better models with more features will hit the market, the way you do with heavy equipment.
Finally, once you enter into a lease agreement, you're liable for those monthly payments, even if your business needs change and you no longer need the unit.
The Pros and Cons of Buying a Storage Container
As with leasing, buying a storage container offers its own list of benefits, as well as a few disadvantages.
Benefits of Buying
The main benefits of purchasing are also financial, though they're the opposite of leasing's pros. First, purchasing a storage container is cheaper in the long run, especially if you expect to need the unit indefinitely. You also gain a variety of tax benefits, such as equipment depreciation (again, talk to your accountant to be sure).
Beyond paying a lower price, owning equipment outright also means that you can sell it when you no longer need it or want to upgrade to a new unit. You may also use the storage container as a source of revenue by renting it to others. When you purchase outright versus making payments, you also don't need to worry about making monthly payments, so there's one less line item in your budget.
Owning the unit also allows you to store whatever you want, whereas a lease typically includes restrictions and guidelines on storage items. Ownership also allows you to customize and modify the storage container to best fit your needs.
In the end, if you expect your need for extra storage space to be ongoing, purchasing a storage container outright is probably the better decision.
Disadvantages of Buying
If cash reserves are limited, and credit is at a premium, purchasing may be prohibitive, especially when you are just starting or are going through a growth spurt. Also, if your business needs change, you now have a container you no longer need. If this occurs too close to your initial purchase, even selling the unit offers minimal return on your investment.
Many businesses have only a seasonal need for extra storage. In these instances, leasing makes more sense.
Look carefully at the full cost of both options, including delivery fees and, in the case of leasing, return fees.
Some of the fees charged in returning a leased container come as a surprise, so work with your vendor to agree on these before signing anything. For example, many vendors charge you extra if the container is dirty or still contains items. In addition, if you made any modifications, you likely face extra charges. Clarify what you can and cannot do, such as drilling holes, before making any type of modification to a leased storage container. You should also ask the leasing agent for a line item breakdown of all costs so that you see exactly what you're paying for and what your lease includes.