The question that actually decides it is what else the cash could do. In a first year business, capital held back has an unusually high value, because the alternative uses are things like surviving a slow quarter, taking on a larger job, or fixing something that breaks. Paying twelve hundred more over three years to keep eight thousand available now is frequently a good trade at this stage and a poor one later.
Buy when the asset holds its value, when you will use it for years, and when the purchase does not take your cash reserve below what you need to operate. Tools, vehicles in good condition, and anything with a long working life tend to fall here. The total cost is lower and you own something at the end.
Lease when the technology moves quickly, when your needs are likely to change, or when the cash matters more than the total. Anything computing related ages badly. Equipment sized for your current volume may be wrong within a year if the business grows. And a lease that keeps three months of costs in the bank has bought you something the accounting does not capture.
Read what the agreement actually is, because the word covers several different things. An operating lease is a rental and the asset returns at the end. A finance lease or hire purchase transfers ownership eventually and is closer to borrowing. The monthly figure can look similar and the position at the end is entirely different.
Check the exit terms before the monthly cost. Early termination charges, minimum terms, and what happens if the equipment fails or your needs change are where lease agreements bite. A twelve month commitment on something you might not need in six is a decision to make deliberately rather than discover.
Watch the total rather than the monthly figure, which is how leases are sold. Multiply the payment by the term, add any deposit and any final payment, and compare that against the purchase price. The gap is what the flexibility costs, and seeing it stated is what makes the trade honest.
Consider buying used for anything mechanical and buying new for anything under warranty pressure. A three year old van at half the price of a new one is frequently the best available answer and neither leasing nor buying new captures it. The framing of the question can hide the option that actually suits.
Understand that the accounting treatment differs and that this matters less than people suggest. Purchases appear as assets and depreciate. Lease payments appear as expenses. Your accountant can explain what that does to your specific tax position, and it should inform the decision rather than drive it.
Then apply the reserve test before anything else. If buying takes your available cash below three months of fixed costs, lease it regardless of the arithmetic. Running out of money is a different category of problem from paying slightly more for equipment.
Ask what happens if the equipment is wrong for you in a year, since that is the scenario the two options handle very differently. A purchase can be sold, usually at a loss. A lease frequently cannot be exited without paying most of what remains.
Check whether the supplier offers a payment plan on a purchase, which is occasionally cheaper than a formal lease and rarely mentioned unless asked. It sits between the two options and is worth a conversation before deciding.