Buying vs. Leasing Commercial Refrigerators: Which Is the Better Option?
The overhead of your business is impacted by every penny you spend. As a result, you should always be looking for opportunities to save where you can. One of the areas grocers and food service businesses can look for savings is in the type of commercial refrigerators they choose. Energy efficient, refurbished TRUE® commercial refrigerators, for example, can save you as much as 50% compared to buying a new unit. However, another consideration is whether it is more cost effective to lease or buy your commercial fridge. Here we look at the pros and cons of both options to help you decide which is right for you.
Similarities When Buying and Leasing
First, let’s look at where you won’t see any differences. Whether you choose to buy or lease a TRUE® commercial refrigerator you’ll still see the following benefits:
- Up to 50% savings when buying or leasing brand new
- Completely refurbished with brand new compressor
- Energy efficiency
- Environmentally friendly
- New LED lighting
- Self-closing doors
- Attractive display cases
- Several configurations and sizes available
- Same warranty
These are all important aspects of your investment.
Buying a TRUE® Commercial Refrigerator
When you purchase a refurbished unit, you receive a 50% reduction in cost on our TRUE® commercial refrigerators: therefore it tends to be the best route if you are hoping to save money. The biggest benefit is that once paid for, your fridge becomes an asset to your business. However, on the con side, you also need more money up front to make your purchase.If finding capital is an issue, then buying might not be advisable, especially if you need to use credit. The interest can be quite high, and the payments lasting over a longer period of time can really add up.
Last but not least, you will usually find that buying makes your business less scalable. If you purchase something too big, you waste space and energy and if your business grows, you’ll need to invest in a larger or additional fridge. You are also committed to keeping the fridge longer, which means you can miss out on new technology that improves safety, efficiency and features.
Leasing a TRUE® Commercial Refrigerator
Leasing allows you to spread out your investment over time. As a result, you maintain better cash flow at the time you would need to invest in a purchase. However, you’ll also be paying for the lease each month. Although it will be lower amounts than what you’d have to pay in a lump sum purchase, and less than what you’d end up paying for interest with say, a credit card purchase, you’ll be paying for the commercial refrigerator as long as you own your business, or decide to purchase a unit.
You do gain flexibility allowing you to decide to purchase a unit once you establish that the size of the fridge you are leasing works for your business. You also remain more scalable should your businesses need to downsize or if you experience growth. Some leases offer ongoing free repairs so you don’t need to sweat it if your warranty expires as you would with a purchase. This can have a negative impact on your bottom line if expensive repairs are needed.
In hand with scalability, you aren’t locked into long-term commitment with a lease, allowing you to upgrade when new technology becomes available. Although you will end up paying more over the duration of the lease than you would have if you paid one lump sum to purchase it up front, if the lease is temporary until you understand your needs, it could be the best solution.
Consider Lease Options
If you are leaning towards leasing your TRUE® commercial fridge, be sure you understand your lease options. For example, if you have the option to buy the unit outright at some point then this can prove to be a good way to go if you don’t have the capital to buy right now.
When you purchase equipment, you pay the full amount of Sales Tax (GST/HST/PST) at the time of purchase. You can claim one large Input Tax Credit (ITC) on the purchase the year you buy the equipment. For a lease, the sales tax is paid in small amounts with each lease payment allowing you to claim an ITC on the Sales Tax portion of the lease cost as long as you have the lease agreement. This often means you pay less tax overall. Also, although you can claim a deduction for interest on a bank loan for the purchase of a commercial fridge, your entire lease payments can be deducted each year. So it’s a good idea to ask your accountant for advice before making your final decision.
Regardless of whether you choose to buy or lease, be sure you understand what is involved. Look at the costs over time, and measure them against your available capital. Consider owning an asset versus simply leasing equipment, as well as how much it costs over time if it’s a long-term lease. You want to make a decision that meets both your financial needs as well as your business goals.
To learn more about your options to buy or lease a TRUE® commercial refrigerator, call Ancaster Food Equipment at 855-201-8657 or contact us here.