Dental equipment loan or lease – which is better?

There are various types of dental financing options, but all of them are categorized into dental loans and dental leases. If you are looking to start your own dental practice, you will need to invest in equipment. Undoubtedly, you will need a lot of money to invest in dental equipment. You will require a great amount of money.

However, if you do not have enough money to pay for them outright, you will turn to asset finance companies in the UK to get your equipment funded. But you have two options. You can either take out a loan or get them on a lease.

Before applying to any finance company, you should ask the following questions: Which will be better – a lease or a loan? What will be the implications of both on your tax benefits? How will it affect your balance sheet? Are you eligible for both types of financing? How do you decide which one is the best option for you?

Dental equipment leasing

When it comes to dental equipment financing, you have two options: loans or leases. Many dentists will find leasing a way better option as you will pay down smaller payments every month. This will not affect your cash flow. Leasing is particularly a good idea when your hefty loan payments can disrupt your cash flows. However, most of the people find that leasing is more expensive than other kinds of financing. The lessor will also put restrictions on the usage of the equipment. Further, despite paying that much money, you will not be able to own it. Well, when it comes to benefits, you cannot just evaluate them based on the amount you pay every month and ownership. There are a lot of benefits of equipment leasing.

  • One of the greatest benefits of equipment financing is that it does not have any impact on your credit line. It does not show as debt on your balance sheet, so it does not increase your debt-to-income ratio.
  • Another benefit of using dental equipment leasing companies is that the initial cost will not be as high as the down payment that would be paid if you chose a dental equipment loan. However, the leasing contract could cost you more at the end of the contract when the lease financing company can overestimate the value of the equipment. However, you will save thousands of pounds if the value is underestimated.
  • You will likely be able to choose more flexible interest rates than a dental equipment loan. You can get cheaper lease payments provided you have a good credit score, and you can rigorously haggle for a good deal. Having a good credit score will give you the upper hand to get the best deal. However, it does not mean that you cannot get a lease in case of a bad credit score. Only higher interest rates will be charged.
  • You do not have to bear the maintenance cost as you are not the owner of the equipment. The lessor will be responsible for all the repair and maintenance work for the upkeep of the equipment.

Although there are certain benefits of using dental equipment leasing, they are subject to some drawbacks as well. Before you make any decision about them, it makes sense to keep their downsides as well. One of the greatest drawbacks is that some leasing agreements could be very complex in nature and full of hidden charges.

These hidden charges can disrupt your cash flow down the track. However, the good news is that you can prevent yourself from being affected by such charges by carefully reading the contract. Some companies twist words to trap you in a very expensive lease. If you find that the terms used in the contract are ambiguous, you should not sign it.

Try to hire a solicitor who will tell you if it makes sense to sign the contract. Further, a standard leasing contract will not let you own the equipment at any stage, so you cannot claim the tax benefits. Direct cost can be written off, but its impact is not much compared to the scenario when you own it. If you want to claim tax benefits, you should sign a lease-to-own agreement where you have a chance to get ownership at the end of the contract.

Dental equipment loan

Financing is way better than leasing if you do not have to worry about your cash flow. Financing will let you own the equipment right from the day first, provided it is not secured. Monthly payments could be bigger, but you can claim tax benefits.

Financing speeds up the process. Leasing involves a lot of formalities, but financing ensures quick funding. You do not need to go to the lender in person.This can act as a tool to let you borrow money at a lower interest rate.

There is no doubt dental equipment financing is way better than leasing as it helps save a lot of money and allows you to own the equipment, but it is also subject to a couple of risks. One of the biggest drawbacks of financing is that you will have to make a bigger down payment. Depending on the cost of the equipment, the size of the down payment will be decided.

It must be between 10% and 25%, depending on the policy of the financing company and your credit score. It may temporarily dip your cash flow. Do not forget the repossession risk is also high, especially when you are taking out a secured dental equipment loan.

How will the lender evaluate your application?

If you are seeking a dental loan, your lender will check your credit score and debt management into the bargain. Credit score evaluation is a must to understand your past payment behaviour. The interest rates will be levied after a thorough check of your credit report. In order to get competitive interest rates, you should try to keep your credit report in good condition.

However, if you are looking to lease dental equipment, you do not have to get into too much formality. Just keep your credit score OK and prove that you can manage to pay down monthly payments as per the contract.

The bottom line

If you need to have financed dental equipment, you can choose either a loan or a lease. Before you choose any of the options, you must carefully decide which one is suitable for you. Of course, a lease will be benign if you have cash flow problems, but at the same time, it makes more sense when the equipment is too expensive, and you do not have to use it frequently.

Otherwise, you should use a loan. This will allow you to own the equipment. Make sure to have your credit score up to snuff, whichever funding option you choose.

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