Medical equipment: Should practices buy or lease?

One decision often facing medical practice owners is whether to buy or lease equipment. Here are a few points to consider before making your decision.

The clear advantage of purchasing your office equipment is that you become the owner of that machine.This makes the most sense for equipment that you know will last a considerable amount of time and doesn’t run the risk of becoming obsolete in the near future. Use your past experience to evaluate how long certain equipment should last.

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If you are purchasing a piece of equipment that you don’t know much about, ask around to see what other physicians using the same or similar equipment have experienced. As you can imagine, you tend to get a better idea of the quality of a machine from someone that is actually using the device everyday as opposed to someone trying to sell it.

Short-term costs

Depending on your practice’s financial situation, obtaining enough cash to purchase an expensive piece of equipment may be difficult.

Even if you are considering borrowing the money, it can still be tough to come up with enough money for the down payment. I know this is the case with many of the small and mid-sized medical practices that we work with.

This is where working with your accountant or business consultant can help to determine a plan. Maybe you can afford it now or possibly save up over a certain amount of time to purchase it later. However, if it just doesn’t make financial sense to purchase the machine, leasing could be a viable option.

There is usually very little initial cash investment, which can be valuable to practices that either lack cash or prefer to reinvest their cash into other areas of the practice.

Next: Evaluating the long-term costs

Long-term costs

If the equipment is going to last a long time and will require only inexpensive routine maintenance, purchasing the equipment will most likely be better in the long run.

If you just add up the monthly lease payments over the lease term and compare that to the purchase price, you might think it would never make sense to lease. However, what you must consider is that repair and maintenance costs come out of your practice’s cash flow when you purchase. I know it is impossible to predict every expense that will be associated with a machine, but this is where asking around can help give you an idea of what kind of upkeep will be necessary.

If you anticipate that there could be some costly repairs in the future, leasing may be the right choice. Make sure you are aware ahead of time what kind of repairs and maintenance costs are included in the lease terms.

It boils down to analyzing your financial situation and weighing the pros and cons of both leasing and purchasing. Take some time at the outset to learn how each scenario could play out. The best decision you can make is an educated one.

Drew Haynes, EA, CHBC, is an accountant and certified healthcare business consultant with Medical Resources Group, Inc., in Louisville, Kentucky. Send your financial questions to medec@advanstar.com.