What is the difference between buying and leasing gym equipment?
Gym equipment is the bedrock of a gym, as several fitness exercises require the use of machines. Without equipment, the facility would just be an empty room.
As a new gym owner, you might face the decision of buying or leasing the equipment. Both options are great, but the major difference is the ownership and cost.
When you buy fitness equipment, they become the gym's property as soon as you pay for it. You could decide to make payment in full, or in installments, depending on your finances.
Paying in installments involves signing an agreement with the supplier and the amount to be paid. This makes you the owner. But if you default on payment, the supplier could take the equipment back until you pay the balance.
With a lease arrangement, the equipment does not become the gym's property. This situation is similar to renting an apartment. The apartment is only yours for a specified period of time and once your payment runs out, you either renew the rent or leave the apartment. Leasing fitness equipment also works with this principle. Making monthly payments on a leased gym equipment does not make you the owner. In some cases, you can purchase the equipment at a reduced price during the life of the lease.
There are several factors to consider when making this decision as each option has its pros and cons. This article will explore these factors and their pros and cons so you can make the best decision that would be best for your gym.
Cost
Leasing: Leasing gym equipment involves renting the equipment from a provider to use in your gym. With a lease agreement, you have to make a monthly payment to the supplier. At the end of a lease agreement, you can decide to return the equipment, renew the lease or buy it at a lower price.
Leasing equipment is a good option when you do not have enough capital to buy equipment. You could consider a loan to buy equipment, but leasing might be easier and payment would be more flexible. Also, with a lease, you could be eligible for tax deduction or write-off if it's calculated as an operating expense. However, leasing equipment in the long run could mean paying more because the equipment never becomes an asset.
Buying: It’s no secret that buying equipment is expensive. If you go this route, you will need a decent amount of cash for the purchase. Usually buying equipment when starting a gym is a better option. When you purchase the equipment, it becomes an asset. In fact, you could decide to sell the equipment to buy an upgraded one or offset other costs in the gym. Even if buying equipment could mean a higher upfront cost, owning them is cheaper than leasing in the long run. However, the equipment will be calculated with the gym's assets when calculating tax.
Maintenance
Leasing: One of the pros of leasing gym equipment is the lower cost of maintenance. Depending on the contract you have with the equipment supplier or brand, equipment maintenance could be included by the supplier or you get to split the cost. Leasing companies have incentive to make sure the equipment remains in quality condition. Something else to consider is leased equipment can be exchanged for newer versions when the current ones are outdated. Check with the supplier for these details.
Buying: When you buy equipment, you are responsible for maintenance and upkeep costs. If something breaks, you are usually responsible for the cost of replacement. So you should actively work towards adequate maintenance of the equipment so they can be used for longer periods. Again, since you are the owner of the equipment, you foot the bill for all maintenance costs. Cleaning, lubricating and servicing these machines are all essential steps towards prolonging the life of the equipment.
Quality of Equipment
Leasing: One of the pros of leasing gym equipment is the ability to choose from a wide range of machines because you do not have to pay upfront. You could even select machines with the best quality and pay monthly for them.
When the gym equipment is leased, you could exchange them for newer models after a few years or if they break, depending on you agreement. Another thing to consider is how leased equipment affects customer satisfaction. When you lease equipment, you typically get the latest and greatest machines. Members usually love that!
Just remember, when taking a lease, be sure you read all terms and conditions before signing the agreement. Suppliers are great at hiding hidden details in the fine print. Those details could cost you!
Buying: Because good quality equipment tends to be expensive, new gym owners might be tempted to buy inferior products to cut costs. This is your call. Obviously we all want our gyms to have the best equipment available, but cost is a real constraint.
But if you can afford it, buying gym equipment upfront is a great option because you can brand the machines and give them a facelift to match your brand's identity. Also, buying equipment allows you the luxury of selecting machines of choice and having them in a desired color.
When buying gym equipment, be sure to think about your gym space and layout. How much equipment do you really need? Consider how much the piece of equipment will be used, and at what capacity.
When starting as a new gym owner, it's easy to get overwhelmed by the decision of buying or leasing equipment. The decision to buy or lease equipment depends on your situation, available capital and personal choice.
If you are looking at establishing a standard gym with quality equipment but are low on funds, leasing equipment could be a better option than loans. However, buying equipment is better in the long run as it becomes an asset to the gym. This comes with the advantage of being able to customize the equipment to match the gym's brand identity, as well as the facility's decor. Having custom branded equipment could improve the customer experience.
Also, you always have the option to resell the equipment or exchange it if you ever want to upgrade.
So, whether you are thinking of buying or leasing gym equipment, understand that you should consider the long-term goals and needs of the gym.
