Should You Hire Vs Buy?

2 weeks ago

Should you hire or buy business equipment?

It’s a question every business owner faces sooner or later: should you hire, lease, or buy?

Your decision to hire/lease or buy equipment can affect cash flow, operations, tax outcomes and flexibility. Buying assets can build equity and unlock ATO depreciation deductions, while hiring or leasing preserves cash flow, offers flexibility, and makes upgrading easier.

That said, hiring can cost more over the long run, so the right choice when it comes to hire vs buy, really comes down to your circumstances.

What to consider

Every business has its own unique strengths and challenges, so there’s no one-size-fits-all answer. Your decision to hire vs buy should reflect your current financial position, how urgently you need the asset, and whether ownership aligns with your longer-term business goals.

If purchasing equipment would put your business’s finances under immediate pressure, hiring may be the smarter short-term move. You can always revisit buying later if the asset proves its value.

Understanding the tax implications for hire vs buy

Tax treatment is one of the key considerations between buying and leasing, so it’s worth understanding how each option works before you decide.

Instant asset write-off allows eligible businesses with an aggregated annual turnover under $10 million to claim the full tax deduction for assets costing up to $20,000 in the first year of purchase.

Spreading depreciation is the alternative approach, where eligible businesses claim deductions incrementally as the asset declines in value over its useful life.

When hiring or leasing, payments are generally treated as fully deductible business expenses, but you won’t be able to claim depreciation, since you don’t own the asset. GST is also handled differently depending on whether you buy or lease, which can affect your cash flow and BAS reporting.

Case study: hire or buy a business vehicle?

To put this into perspective, the table below compares buying versus hiring an $80,000 business vehicle. Buying outright would immediately reduce working capital by $80,000, while leasing could spread costs over 3–5 years, helping preserve cash for other purposes.

While this is a useful guide, the right answer for your business will depend on your structure, GST registration status, financing arrangements and how the vehicle is used. We’d always recommend getting advice tailored to your situation.

Factor	$80,000 vehicle: Buy outright	$80,000 vehicle: Hire/Lease
Upfront Cost	Large outlay of $80,000 plus on-road costs.	Lower upfront cost: establishment fee, deposit or initial rental payment.
Cash Flow	Significant immediate reduction.	Working capital preserved as regular payments are spread over time.
Ownership	Owned by the business.	Finance company or lessor generally retains ownership.
Tax Benefits	Depreciation deductions may be available over time, subject to ATO rules and limits.	Lease or hire payments are generally deductible if the vehicle is used for business.
GST Treatment	Eligible businesses may claim GST credits on the purchase price (subject to GST and vehicle limits).	GST is usually included in lease payments and can usually be claimed progressively.
Maintenance	Business pays for servicing, repairs, registration, insurance and other running costs.	Depends on the agreement; some leases include maintenance while others don’t.
Upgrading	Must sell or trade in when upgrading.	Can be easier to upgrade at the end of a lease.
Asset Status	Vehicle appears as a business asset on the balance sheet.	Depending on the fine print, the vehicle may not be owned by the business.
Depreciation	Can claim depreciation deductions (subject to ATO rules).	The lessor usually claims depreciation; the business claims lease expenses.
Financial Risk	Business bears resale value risk and potential market value decline.	Some residual value risk is possible, but ownership risks are often reduced.
Best Use Case	Businesses with strong cash reserves seeking long-term ownership and asset control.	Businesses seeking predictable cash flow, lower upfront costs and regular upgrades.

Not sure which way to go? Ask yourself these five questions

Before making a ‘hire vs buy’ decision, it’s important to do your homework, starting with a quick stocktake of your business situation. Work through these questions honestly and your answers will point you in the right direction.

Is your cash flow strong enough to purchase outright without affecting day-to-day operations? (If not, buying could put the business at financial risk)
What is the total cost of buying versus hiring over the asset’s useful life? (The long-term cost comparison is often the most telling factor)
Are the available tax benefits such as depreciation deductions or the instant asset write-off, meaningful for your business this financial year?
How quickly might the asset become outdated or need replacing? (If it’s unlikely to last long, the case for buying weakens, regardless of the price)
How frequently will the asset be used? (High-use equipment is more likely to justify ownership; occasional-use items rarely do)

What your answers reveal

There are no right or wrong answers here. What matters is that your responses honestly reflect where your business is right now.

If you answered ‘yes’ to questions 1, 3 and 5, and have the resources to support a purchase, buying is likely the stronger option for your business.

Several ‘no’ answers, combined with limited resources, generally points toward hiring being the better fit, at least for now.

Keep in mind that your answer may also differ across different assets. You might be in a strong position to buy one piece of equipment while hiring makes more sense for another. And if you’re buying, don’t forget to factor in ongoing maintenance costs.

It all comes down to which option will enable you to minimise the impact on your business today while maximising the long-term financial outcome.