If you're a dentist, you already know that it's a very equipment-heavy industry. Especially if you're entering a new practice or starting your own, you're likely faced with multiple decisions about whether it's best to buy or lease your equipment.
Here are some points to consider to help you make that decision:
Leasing isn't renting. And renting isn't leasing. You'll mainly encounter two types of equipment leases. One is known as an operating lease, or a true lease, and it is more of what most people would think of as renting, just like an apartment or anything else. It comes for a fixed period of time, and you may have the option to buy the equipment at the end of the lease with a certain amount of money down. A financing lease is similar to a bank loan.
Can you deduct or not? You may deduct your monthly payment on an operating lease, but you may not depreciate the equipment on your taxes because you don't own it. If you have a financing lease, you may depreciate the equipment from the get-go, but you can only deduct the interest, not the payments. Tax laws have changed, so consult with your tax pro on write-offs and other deductions.
Advancements in technology happen. Often. Say you want to finance $100,000 worth of office equipment and have it paid off in five to seven years. Great! Except ... what technological advancements will happen during that time? Will your newly debt-free equipment be obsolete when you make that last payment, or worse, years before? If your goal is to hang onto the equipment after it's paid off to get your ROI, you might find yourself with out-of-date equipment. If you want to remain up-to-date with cutting-edge options for your patients, leasing might be the safer way to go.
Your equipment is one of the biggest considerations you'll have with your practice, second only to leasing or buying your location. Because there are so many variables, consulting with a Financial Advisor is critical to get your practice off on solid footing. At Harbor West, we specialize in the financial challenges dentists face, and we're here to help.
This information is provided for general purposes and is subject to change without notice. Every effort has been made to compile this material from reliable sources; however, no warranty can be made as to its accuracy or completeness. Before acting on any of the information, please consult your Financial Advisor for individual financial advice based on your personal circumstances.