Buy or Lease

txtan · 03-22-2003, 04:43 PM

I am in the early stages of opening a tanning salon and I am currently researching beds and booths, do you think it is better to Buy or Lease. What are the advantages of each. Is it like leasing a car and in three years you can upgrade to the new model? Thanks for any help you can give, this forum has been the best thing I could have ever found.

JUSTTHEFACTS · 03-23-2003, 08:15 PM

A good lease gives you ownership of the quipment at the end of the lease.

Should you buy or lease?
Buy: No monthly payments, and a depreciation tax write off for 5 years
Lease: no or minimal up front cash, a monthly payment, a monthly operating expense similiar to rent or payroll

I have always paid cash and bought my equipment. I like not having a big monthly payment and I also like the depreciation deduction.
JTF

bjhcpa · 03-27-2003, 12:02 AM

I think buying in this industry has several advantages. The lease payments on these beds seem outrageous compared to what you could buy them for. Also the tax benefit is better when you buy now (unlike what all the leasing companies will tell you).

You can deduct up to 24k of equipment purchased under Sec. 179. Also, starting with the 2002 Tax Relief Act, any new equipment purchased after 9/11/01 gets to take 30% bonus depreciation in the year purchased. So if you bought 100,000. worth of new equipment (bonus depreciation only applies to new equip, not used), you could immediately deduct 24,000 under Sec. 179. The remaining 76k you would then take another 30% deduction of 22,800. That leaves you with a basis of 53,800. You would then take your regular depreciation on the 53,200. (Approx another 8 - 10 of deductions.

So in short 100k of new equip purchased gives you over a 50,000 deduction your first year.

I am a CPA as well as a soon to be salon owner. If you have any questions please feel free to ask. If i dont know the answer i can certainly find it out.

Roger a. Brown · 04-08-2003, 04:32 PM

Look on the puretan website under education. There is some materials there that will prove to be very interesting and assist you in your business venture. www.puretan.net

Funinthesun · 04-15-2003, 02:56 PM

These decisions also depend upon the year's finacial forcast, the available capital at this point in time, and the expected payback speed on any equipment to be purchased. All variables such as seasonal change and a good look at the 5 year plan are also necessary. There are pro's and con's on both sides.. just make sure your decision is well informed.

tanu01 · 04-15-2003, 04:14 PM

STAY FAR AWAY FROM TOMMEL LEASING

Tamar · 08-05-2003, 07:01 PM

bump

TanningEmporium · 08-05-2003, 07:30 PM

tamar, just have a question, what does it mean when you type..BUMP..I have seen you put that in several sections, instead of a remark or answer to the question. Just curious.

Tamar · 08-05-2003, 08:06 PM

It is simply to "bump up" an old topic.

SakeBomb · 10-29-2003, 07:57 PM

I would recommend you go the SBA guaranteed loan route if you can. Participating SBA-approved banks charge less because a good portion of the loan is guaranteed. Their source of funds is also much lower. The drawback is that this does take between two to three months, but if you have good credit, why not. The second choice would be a direct loan from your commercial bank secured on a second deed of trust on your home. The interest rates are higher than a first mortgage, but a lot better than a leasing company. Leasing companies would be my last choice. I am not suggesting that leasing companies should not be used, they do have their use, but they charge exorbitant interest rates. The seasonality of tanning makes meeting high, fixed monthly payments prohibitive. You want to structure your payments so that you can meet them during the slow period. I hope this helps. Tommy

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03-22-2003, 04:43 PM	#1 (permalink)
txtan Join Date: Mar 19 2003 Posts: 2 Rep Power: 0	I am in the early stages of opening a tanning salon and I am currently researching beds and booths, do you think it is better to Buy or Lease. What are the advantages of each. Is it like leasing a car and in three years you can upgrade to the new model? Thanks for any help you can give, this forum has been the best thing I could have ever found.

03-23-2003, 08:15 PM	#2 (permalink)
JUSTTHEFACTS Join Date: Mar 7 2003 Posts: 79 Rep Power: 0	A good lease gives you ownership of the quipment at the end of the lease. Should you buy or lease? Buy: No monthly payments, and a depreciation tax write off for 5 years Lease: no or minimal up front cash, a monthly payment, a monthly operating expense similiar to rent or payroll I have always paid cash and bought my equipment. I like not having a big monthly payment and I also like the depreciation deduction. JTF

03-27-2003, 12:02 AM	#3 (permalink)
bjhcpa Join Date: Jan 6 2003 Location: Florida Posts: 247 Rep Power: 6	I think buying in this industry has several advantages. The lease payments on these beds seem outrageous compared to what you could buy them for. Also the tax benefit is better when you buy now (unlike what all the leasing companies will tell you). You can deduct up to 24k of equipment purchased under Sec. 179. Also, starting with the 2002 Tax Relief Act, any new equipment purchased after 9/11/01 gets to take 30% bonus depreciation in the year purchased. So if you bought 100,000. worth of new equipment (bonus depreciation only applies to new equip, not used), you could immediately deduct 24,000 under Sec. 179. The remaining 76k you would then take another 30% deduction of 22,800. That leaves you with a basis of 53,800. You would then take your regular depreciation on the 53,200. (Approx another 8 - 10 of deductions. So in short 100k of new equip purchased gives you over a 50,000 deduction your first year. I am a CPA as well as a soon to be salon owner. If you have any questions please feel free to ask. If i dont know the answer i can certainly find it out.

04-08-2003, 04:32 PM	#4 (permalink)
Roger a. Brown Join Date: Aug 8 2001 Posts: 61 Rep Power: 0	Look on the puretan website under education. There is some materials there that will prove to be very interesting and assist you in your business venture. www.puretan.net

04-15-2003, 02:56 PM	#5 (permalink)
Funinthesun Join Date: Apr 15 2003 Posts: 3 Rep Power: 0	These decisions also depend upon the year's finacial forcast, the available capital at this point in time, and the expected payback speed on any equipment to be purchased. All variables such as seasonal change and a good look at the 5 year plan are also necessary. There are pro's and con's on both sides.. just make sure your decision is well informed.

04-15-2003, 04:14 PM	#6 (permalink)
tanu01 "The Man" Join Date: Mar 4 2003 Location: ohio Posts: 3,976 Rep Power: 7	STAY FAR AWAY FROM TOMMEL LEASING

08-05-2003, 07:01 PM	#7 (permalink)
Tamar Join Date: Aug 15 2001 Posts: 2,240 Rep Power: 7	bump

08-05-2003, 07:30 PM	#8 (permalink)
TanningEmporium Join Date: Jul 15 2003 Location: 213 Skyland Shp Ctr Posts: 4,192 Rep Power: 8	tamar, just have a question, what does it mean when you type..BUMP..I have seen you put that in several sections, instead of a remark or answer to the question. Just curious.

08-05-2003, 08:06 PM	#9 (permalink)
Tamar Join Date: Aug 15 2001 Posts: 2,240 Rep Power: 7	It is simply to "bump up" an old topic.

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