Rent or Buy Catering Equipment


May 15, 2013 Facebook Twitter LinkedIn Google+ Catering Equipment


Rent or Buy Catering Equipment

As those of us who are in the catering business know all too well, being successful is more than just about serving up delicious and attractive food that people are prepared to pay good money for. It`s also about logistics keeping the food at the right consistency and temperature and getting it to the right place at the right time. The vital ingredient in all of this is the right equipment.

Of course, your equipment needs depend entirely on what type of catering establishment you are aiming to have. A coffee house offering sandwiches, paninis, muffins and cupcakes will have very different requirements to a full-blown caff offering all-day breakfasts, pasta and ice cream sundaes.
So, before starting out you`ll have to answer the burning question: should you rent or buy your equipment? Both routes have several pros and cons.

Renting

Advantages
Renting is initially more affordable if you lack sufficient capital to put into expensive equipment. It also enables you to manage cash flow more easily that`s vital for start-ups.

Rental equipment is usually newer and more modern and anything that breaks down can be speedily replaced.

You`ll have greater choice of equipment. If you don`t like an item or it doesn`t suit your business, you can simply try something else.

Disadvantages
Renting is likely to be more expensive over the longer term than buying.

The equipment you may need may not be available at any given time.

Buying

Advantages
Buying will be cheaper in the long run, especially if your business grows. And if you have sufficient capital or access to loans, you can buy in bulk, which works out considerably cheaper over time.

You will have more control over your business as the assets will (eventually) belong to you.

There are tax advantages associated with buying equipment (as you pay off your debt over time). Do talk to your accountant about this.

Disadvantages
Buying requires a sizeable outlay at a time when you may not be able to afford it.

You will only get tax relief on the interest portion as an expense, not the principal amount that you`re paying on the loan.

Why not lease?
Of course, you could opt for a third way and lease your equipment. This means that you don`t actually own the item but you pay a monthly fee to use it, returning it at the end of the lease. In many cases you get the option to buy once the lease term has ended.

Whether to lease or buy depends on what your company`s needs are, how often you will use a piece of equipment and how long you plan to keep it. The more frequently you use something, the likelier it is that it`s best to buy. For short-term needs, though, leasing may be better than buying (and then having to re-sell). If you think you may wish to keep the item after all, do check if there`s a buyout option once the period of lease is over.

Leasing generally requires less cash down and the monthly payments should be manageable. It usually qualifies for tax benefits, too, but these can differ, depending on the type of lease. It`s best to talk to your accountant about this.