Gym Equipment Financing: Is It Better To Rent Or Buy Fitness Equipment?

Without weight machines, treadmills, exercise bikes, and barbells, your gym or fitness center is just a big, open room with a bunch of rubber mats. While there’s nothing wrong with calisthenics, you’ll probably want to lure in your fitness fanatics with some exercise equipment.

That leaves you with the question of whether to rent gym equipment, rent to own workout equipment, or buy gym equipment.

Below, we’ll look at some of the ways you can approach gym equipment financing.

Advantages Of Buying Gym Equipment

The cheapest way to own equipment — without considering external factors — is to buy it. Once you’ve purchased equipment, it’s yours for as long as you want it or as long as it lasts, whichever comes first. Ideally, pieces of equipment that you buy outright will last a long time with minimal maintenance.

Generally speaking, the less complex the item and the fewer the moving parts, the more sense it makes to buy it. For example, there’re only a few things that can go wrong with a dumbbell, and it’s unlikely to be obsolete years down the road.

Ways To Buy Equipment

If you want to completely avoid interest payments, you’ll have to buy gym equipment out of pocket. Of course, that requires that you have healthy working capital and a large amount of cash on hand.

Everyone else is looking at financing their equipment through a loan or a type of lease called an equipment finance agreement (or more broadly, a capital lease).

An equipment loan typically covers about 80% of the cost of your equipment. Like other term loans, it will accrue interest over time, so expect to pay more in aggregate the longer your loan lasts. Typically, the equipment you’re buying serves as collateral for the loan, although you may also be asked to give a personal guarantee or put up additional collateral.

If you don’t have the credit or capital to secure an equipment loan, you may want to look at an equipment finance agreement. While leases are generally thought of as a type of rental, this type of lease will transfer ownership to the lessee (you) either immediately or over the course of the lease. Most capital leases have small residuals (the remaining amount that you have to pay to formally own the item at the end of the lease), sometimes as little as $1, which means you can expect to pay the vast majority of the equipment’s cost (plus interest) over the course of the lease.

Generally speaking, loans are less costly than leases, but harder to qualify for. Leases, which can be offered by either a third party or a captive lessor, will usually cover the full cost of the item. Some lessors will even cover shipping expenses.

Advantages Of Renting Gym Equipment

It’s nice to own your equipment, but sometimes it’s not your best option.

Exercise fads come and go. The cutting-edge machines of several years ago may be obsolete hunks of metal now. Further, they may require more maintenance than they’re worth.

Do you want the option to easily return and upgrade? Would you like to be able to write your monthly payments off as operating expenses? If so, you may want to consider renting or equipment leasing.

Ways To Rent Equipment

Renting commercial gym equipment usually means getting an operating lease. Typically, this type of lease allows the lessor to retain formal ownership of the equipment while you are granted permission to use it for the life of the lease. Depending on the agreement, either you or the lessor may be responsible for upkeep and repairs.

Compared to capital leases, operating leases typically have lower monthly payments but a significantly higher residual. While you do often still have the option to buy the equipment at the end of the lease (usually for fair market value), you’ll generally return the equipment at the end of your term.

Note that not all operating leases are eligible to be written off as operating expenses. If your financial strategy depends on this, make sure to discuss the any prospective lease with your lessor and your financial advisor.

The Cost Of Financing Gym Equipment

In addition to the ticket price of your gym equipment, expect to incur some additional charges depending on the type of financing you go with.

Here are some of the more common costs to expect:

• Interest: This is (usually) the APR of the loan or lease, although some lenders may use a flat rate instead. In either case, the longer your term length, the more money you’ll be spending on the item.
• Origination Fee: This is a closing fee some lenders charge in addition to interest. It’s either a percentage of the amount you’re borrowing (1% – 5% is typical) or a flat fee. This fee is more common with loans than leases.
• Administration Fee: This is a fee charged in addition to interest to maintain your account. It may be a percentage or a flat fee. It’s more common with leases than loans.
• Down Payment: A payment you’re expected to make at the time of closing. This is either the portion of the cost that an equipment loan didn’t cover or, in the case of leases, the first (and sometimes last) month’s payment.
• Residual: This is the amount of money you’d owe if you were to purchase the equipment at the end of the lease. In the case of capital leases, the residual may be a trivial formality ($1, for example). In the case of operating leases, it may be substantially higher, typically the fair market value of the asset.
• Shipping: Depending on the type of financing you select, this may or may not be covered by your lease. Loans rarely account for shipping expenses.

Third Party Financers

If your equipment vendor has a captive lessor, they may offer deals especially suited to gyms. That said, don’t assume they offer you the best rates. Your local bank or credit union may offer competitive financing, especially if you have an established relationship with them — and don’t have bad credit.

You can also seek financing through online lessors. Here are some that finance gym equipment.

eLease

Types of Leases: • $1 buyout; FMV; equipment finance agreement (EFA)

Visit the eLease website Read our review

eLease finances gym equipment through one of three types of leases. In addition to normal interest rates, expect to pay an administrative fee, as well as your first and last month’s payment as a down payment.

National Funding 

Types of Leases: • Capital leases

Visit the National Funding website Read our review

National Funding primarily deals in term loans and merchant cash advances, but they also offer capital leases to gyms looking to own their exercise agreement.

Final Thoughts

Whether you choose to rent or buy gym equipment for your fitness center, you’ll have numerous financing options. Remember to consider the life cycle of the pieces you’re buying (and the impact sweaty bodies pumping out reps will have on them) to decide whether it’s worth building equity in items.

Looking for more equipment financing options? Check out our equipment financing comparisons and reviews.