In deciding whether to buy or lease exercise equipment for your gym, you need to consider your situation. There are pros and cons to both approaches, depending on the amount of capital you have available and your tax situation.
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.
Your lease payments can generally be deducted on your tax return as business expenses, which will reduce the overall net cost of your lease. On the other hand, you can deduct the cost of your newly purchased equipment up to $500,000 in the first year. 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. Unless you have a really big need for a tax break this year, it’s probably better not to saddle yourself with an investment in equipment that will eventually break down and become obsolete. Leasing equipment allows you to always have the latest and greatest for your customers, without all the maintenance headaches.
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!
What has been your experience?