Should I buy or lease gym equipment for my business?
The decision to buy or lease commercial gym equipment depends on the amount of capital you have and your tax situation. There are pros and cons to both approaches. Leasing allows you to change out fitness equipment every few years while incurring lower maintenance costs, and payments are generally deductible as a business expense. It is also easier to obtain leases than equipment loans. They may, however, cost your health club more money in the long-term. New gym equipment loans though, now offer better tax advantages due to the revised Tax Cut and Jobs Act of 2018 but still saddle you with a fixed, depreciating asset.
Regular Equipment Replacement
One of the biggest benefits to leasing, apart from the obvious lower amount of capital outlay required, is that you can change out your equipment every few years. Having brand new equipment is definitely a plus when it comes to customer satisfaction, and they’ll think you’ve spent a fortune. You should have lower maintenance costs and less equipment down time as well, if you choose your manufacturer and vendor wisely.
The Tax Cuts and Jobs Act of 2018 significantly increased tax advantages for small business deciding between buying and leasing gym equipment. Your lease payments can generally be deducted on your tax return, which will reduce the overall net cost of your lease. On the other hand, due to TCJA the maximum deduction for the purchase of most types of qualified equipment has doubled from $500,000 to $1 million for businesses that spend less than $2.5 million per year on business equipment. Included in this mix is an incentive for buying used business equipment as well.
There is also a first-year bonus depreciation deduction available for property placed into service from 2018 to 2022. The depreciation deduction will be phased out starting in 2023 and end in 2026. You need to consult with a tax accountant to decide which option would be more beneficial for your particular situation.
Leases are easier to obtain and give you more flexible terms than equipment loans, which can be a significant advantage if you have poor credit or need a longer payment plan. You may be stuck with a lease, however, or pay high penalties if your gym should fail and you no longer need the equipment. You’ll also be stuck paying off purchased equipment, but at least you can sell it.
Higher Overall Cost
Leasing equipment is always more expensive than purchasing it, in the long run. Those more flexible terms do come with a price. Also, you never build any equity in the equipment. If you choose to purchase your gym equipment, eventually you own it, and it can be a significant part of the asset, should you decide to sell your facility. On the other hand, accounting for wear and tear as time goes by, the equipment may not be worth all that much.
Considering the high cost of opening a gym, and the need for extensive financing, for most new gym owners leasing is the way to go. Leasing equipment allows you to always have the latest and greatest for your customers, without all the maintenance headaches.
However, although this blog originally recommended leasing when it first published in 2013, with the advent of the TCJA, we suggest owning your gym equipment might be a good idea. Although buying equipment does carry the risk of breakdowns and obsolescence, purchasing used gym equipment may make this choice easier at this time.
As we’ve detailed in other blogs, there are many good reasons why you should buy used gym equipment and this legislation provides one more incentive to own your fixed assets.
The solution to buying or leasing fitness equipment
A workable compromise might be to purchase free weights, benches and fixed equipment, and then lease all the stuff with the moving parts that tends to break down more easily! Talk to your accountant first to see how this TCJA affects your decision.
Of the many decisions an owner has to make, choosing which gym software to use may be one of the most critical. With Gym Insight, our gym management software provides a clear, transparent picture into your company’s financials and member base. Our software is built in-house, by fitness club owners. There are no cumbersome third-party plug-ins or complicated protocols, and it’s available for a single, low monthly subscription price — no hidden fees, no links to your payment processor. Call us today for a free demonstration on how we can lower your software management costs and free up more of your capital!
This blog has been updated and first ran February 26, 2013 and modified Jan. 12, 2021
Great article although found it later. Thanks for sharing.
Has anyone used any of these companies that rent out fitness equipment?
If so, can someone tell me how there service was.
Hi Shoshana, I’m looking to rent out my cardio machines, but I wanted to ask about Global Fitness, and how was there service?
Rent To Own
Great! Thanks for sharing this informative blog.
Rent To Own
Great! Thanks for sharing this post. The post really helps business owners in deciding whether to buy or lease exercise equipment for their gym.
When you lease gym equipment, you�ll always have state-of-the-art machines. Having up-to-date equipment will help you attract and retain members.
It would be nice if a new business model were to be able to accomplish my interests in gym equipment. I would like to be able to rent a workout system due to the heavy investment. I imagine that a truck similar to a PODS or deliverable storage would roll back a gym into my garage. Of course there are different needs but the point here is that most average pre-committed health seekers buy equipment and then are stuck with it. Instead they should rent it short term and incentives to continue will entice.
Im looking to start a gym up. In the works of leasing out a 5,000-7,000 sq feet place.
Could you possibly provide an approx cost for leasing. I�m looking at starting off with 15 treadmills, 10 bikes, 10 elliptical and 2 rowers. Thanks
If you could give me the purchase price that be great too. Im looking at Life Fitness or Precor Brand
Can you email me with your info
How can I contact you for info on the company you use for leasing equipment. Thank you in advance
Personally, I think it’s wiser to purchase an equipment, but, if and only if, you have the right equipment. I think it’s impractical to lease equipment because there is no guarantee that you can always find time to work out. Whereas if you buy an equipment, it’s always there, always available. Plus, when you get the right equipment (I highly recommend you to get a smith machine), you can be sure that you can maximize your workouts by targeting your problem areas and improving your assets.
Please contact me. We are opening a weight loss center. Need commerical-grade recumbent bike, power plate, and i-Lipo or comparable.
Rico, I’m working on a college project to set up my own gym. Could you possibly provide an approx cost for leasing. I’m looking at starting off with 6 treadmills, six recumbent bikes, 6 elliptical and 2 rowers. I figured it wise to rent the cardio and buy the weigh machines. Your help would be appreciate, thanks
@Rico Gallarza I’m interested in finding out more about your leasing program! How do I contact you?
We rent fitness equipment on a month to month basis with only a six month minimum. Our packages include: Free Maintenance, service, repair, and/or replacement for the life of your Rental. Contact me and I’ll be more than happy to speak with you.
Rico C. Gallarza
Global Fitness, Inc.
Deborah D. Robinson
Fitness supplies renting permits the long or fleeting rental of workout gear as an elective, or an antecedent, to buy. Renting offers various profits. A lease settles the starting cost of speculation in fitness gear, which permits to utilize and own workout equipment that they are unable to afford. While fitness supplies renting can take less in the short term but long-term costs may surpass the value of the gear.
To buy or to lease gym equipment? This is indeed a great question. Thanks for sharing this post to us. This will really help business owners in deciding whether to buy or lease exercise equipment for their gym. Also the pros and cons to both approaches, depending on the amount of capital they have available and their tax situation.
Thanks for your feedback Grace!
Lawrence, i believe you have stated the good points when it comes to leasing equipment and in this case fitness equipment. Most business owners nowadays have the option to consider leasing equipment versus buying it. There are after all huge long term benefits like a better management of cash flow. I think it would be wise to chose wisely the kind of leasing companies. They have to be reputable and genuinely offer real value to its customers. In the end, its really dependent on the kind of industry or business you are in…its really a question to buy or to lease in the end.
Comments are closed.