Although there are many factors that influence the choice of the gym, one factor is common: the equipment. Most people want equipment that is in good condition and easy to use. These are the essential requirements to ensure your success as a gym owner.
You need to think carefully about your equipment, whether you are starting from scratch or updating your existing facility. Your inventory should be able to attract new customers as well as meet the current needs of existing members. However, this can also be one of the most costly parts of your business. The most important decision that you will make is whether to purchase or lease your gym equipment for sale.
It might seem obvious to some, but it is not for everyone. However, with the right knowledge, you can make the best decisions for your long-term success.
Once you’ve made your decision and your business is booming, you’ll need a way to stay organized and you can do that with gym management software.
What is the difference between leasing and buying gym equipment?
The difference between leasing and buying gym equipment is based on ownership. It’s like buying a car. You will most likely find a lender to lend you money to purchase the vehicle. As long as you keep making your monthly payments to the lender, you become the owner of the vehicle once you have reached an agreement. The lender can take the vehicle if you are unable to pay your monthly payments.
You may choose to lease a vehicle. You are still paying a lender but are not the owner. You have two options: either you can return the vehicle to the dealer or purchase it at a lower price.
The same structure is used for fitness equipment. You are the owner if you decide to purchase, either through a loan, or full payment. If leasing seems like a better choice, you will agree to pay the owner for the use of the equipment for a set period.
After you have understood the differences between leasing and buying, you can decide which option is best for your business. To do this, it is important to know the pros and cons of each.
The benefits of buying gym equipment
You have ownership of your equipment. This is the main benefit of purchasing gym equipment instead of leasing. It is possible to keep the equipment for as long as you want, or until you need to replace it or upgrade it. You can also increase the value of your business by owning it in many ways.
It gives you an asset.
Assets are generally good assets for any business. If you are looking to sell your gym, equipment is an asset. Because of the value, you add to the equipment, you can ask for a higher asking price. Potential buyers may be more interested in your equipment than you are because they don’t have to spend time or money searching for them.
To offset upgrade costs, you can sell it.No matter how you slice it, expensive equipment can be costly. Your business could be in a difficult financial position if you have to pay the full cost of upgrading. If you are the owner of your equipment, you may be able to sell it and make a profit to pay for the new pieces. You can keep your facility current for prospective and current members by selling your equipment.
You Can Customize It.
It can be a lot of fun to put your own stamp on the design of your facility. You can personalize your equipment to match the theme of your gym, such as choosing colors and putting your logo. This can promote a sense of community among potential members, which can make it more appealing to them when they decide whether or not they want to join.
Leasing gym equipment has many benefits
While equipment ownership is nice, it may not be the best option for your gym. You have the flexibility to lease the equipment and can be ahead of your competitors.
Lower up-front cost
A lease agreement for gym equipment usually requires a lower initial payment than a loan or purchasing it outright. Although some lease agreements may require payment of the first and last monthly installments immediately, these costs are still less than what a down payment would be for equipment purchased outright. These savings mean that your company won’t be short of cash, and you can use the money for other purposes (like these four). Ideas for gym improvements).
Get more frequent updates owners will likely keep their equipment for as long as they can afford. The lease term is usually shorter than the equipment’s life, but leasing allows for more flexibility. It is important to keep your facility current to attract new customers and maintain your existing members’ satisfaction.
You may be eligible for tax benefits depending on which type of lease you have. Your monthly payments may be eligible for deduction as operating expenses if you have an operating lease. These monthly payments, which are usually lower than the tax rate, can help to preserve cash flow for your company.
However, capital leases work differently. Capital leases can be treated as a purchase and you will receive ownership tax benefits. This has the advantage that you can write off the entire equipment cost as an operating expense the year it is purchased and not depreciated over its life.
You can also lease to pay your monthly rent pre-tax. You will be able to save money by making your monthly payments pre-tax. Let’s take an example with fake numbers: If your business earns $10,000 per month, your tax rate is 35 percent, and your equipment lease payment, $1,000.
You will pay $3,500 taxes if you take 35 percent of $10,000. The taxable amount drops to $9,000. However, if your $1,000 lease payment is deducted, it will still be $3,500. Your 35 percent tax will be $3,150. This is a savings totaling $350
There are downfalls to purchasing equipment
Although owning your gym equipment can have benefits for your balance sheet, there may be some downsides. First, the initial purchase of equipment can drain your company’s cash reserves. This is true whether you pay out-of-pocket or make large down payments on loans. Your business’s future cash flow can be affected by high monthly payments for purchasing loans.
You are responsible for any repairs and maintenance. This will not only cost you more money, but it could also cause inconvenience to your customers. These services are usually provided by the lessor in lease agreements.
Although no one sets out to open a business expecting it to fail, it is essential to be prepared to handle any eventuality. If you decide to buy your equipment directly and your business closes after a short time, you will still have all of your inventory. It might be possible to sell the equipment, which could help you recover some of your lost money. However, if you can’t find a buyer for it, you will still have it. Leasing allows the equipment to be returned back to the lessor.
Leasing Equipment: Downsides
Leasing gym equipment is more advantageous than buying. The downside is that you don’t have ownership rights and all the associated benefits. Although the equipment may be recognized as an asset and corresponding liability on the company’s balance sheets, this does not necessarily mean that you own it.
Unless the lease offers an option to purchase the equipment at a lower price at the end, you must return it to the lessor. This means that you cannot sell the equipment at any time, regardless of whether you are trying to recoup some money or to a new owner.