MARIETTA, Ga. — When it comes to acquiring commercial laundry equipment, businesses face a decision between buying and leasing. Each option offers its own financial, operational and maintenance implications that can impact the bottom line.
This article explores the key differences between buying and leasing, which can help investors and business owners make an informed choice that aligns with their financial strategy and operational needs.
Since authorized distributors are frequently the source for new equipment, American Coin-Op sought the aid of a distributor representative, Jason Downey, executive vice president of business development for Southeastern Laundry Equipment Sales, to learn more about the topic.
Part 1 of this article introduced the concept of leasing vs. buying and touched on types of leases. Let’s conclude:
There are potential tax benefits to be had related to equipment acquisition, says Downey, who advises anyone seeking equipment to consult their tax adviser to ask about particulars.
“The biggest one that I’m familiar with is that on an operating lease, where it’s more of an all-inclusive lease, it’s considered more of an operating expense vs. a capital payment or depreciation schedule.”
Depreciation is an annual income tax deduction that allows a property owner to recover the cost or other basis of certain property, including equipment, over the time the owner uses the item. It’s an allowance for wear and tear.
Several years ago, a tax law that came on the books expanded bonus depreciation to 100% of the cost of eligible new equipment. But that is being phased out and has fallen to 40% for 2025. It will fall to 0% by 2027 unless extended by new legislation.
If a new laundromat owner were to lease their equipment, what would happen at the end of the lease term?
“I think the capital lease would probably be more like a potential dollar buyout, a balloon payment, something at the end of it, depending on the type of lease or who you’re leasing it from. An operating lease would be either a renewal or an opportunity to upgrade into newer equipment, get the latest and greatest.
“I think your opportunity to get into newer equipment quicker would probably be greater with a lease vs. a finance deal. Once you’re done with your finance, that’s your asset, you own it ... I think that would be an advantage of leasing: you could probably get newer equipment quicker. It might cost you a little more over the life of it, but it just depends on how you want to operate your business.”
Which option—buying or leasing—would provide greater flexibility for scaling a laundromat business, such as adding more machines or upgrading technology?
“That’s a tough one. I keep coming back to what kind of laundromat owner you want to be. Do you want to be hands-on or hands-off? If you want to be hands-off and rely on resources to help you run some functions of the business, like taking care of your equipment, I think the lease is the right way to go. It will decrease your bottom line but you’ll have a higher level of support.
“For scaling purposes, my general message is how do you see yourself involved in that business and how much time do you have to put in that business? What works best for you?”
In closing, Downey says those looking to acquire equipment can benefit from learning more about the available options.
“I think people probably need a better level of education on the different options offered. I would say the majority of our customers go right down the financing funnel and probably don’t get as versed in it. I think the industry as a whole is finance-heavy and that we distributors have more options that people need to be educated on.”
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].