As the owner of an art leasing brokerage, I get asked a lot of questions by my clients. One of the questions I run into most frequently is whether it's better for a client to lease or to purchase artwork. I decided to put together this fairly simple guide to help answer that question. Leasing and purchasing artwork both have their own benefits, so to begin with I've provided a short overview of both options:
Why Lease Art?
There are a number of reasons and scenarios where leasing artwork makes sense. It allows you to create a unique environment without the large upfront cost and commitment. For many businesses, there is also a tax benefit – when artwork is purchased, it tends to be classified as a non-depreciable capital asses, whereas with a lease it's on the expense side of the balance sheet (note – I am certainly not as qualified to answer questions about this as a CPA or tax attorney and I always recommend consulting an experts when exploring potential tax ramifications). Lastly, and perhaps most appealing, it allows for change. If you are an individal or business that wants to be able to affordably rotate artwork, even once a year, without having the cost and time associated with long-term storage, maintenance, preservation and care that's typically required, than leasing might be your best bet.
Why Purchase Art?
There are also a number of reasons to acquire art. For some it can be an investment and a hedge against the viscisitudes of the market. In my own case, I find that the return on investment when I purchase artwork is much more immediate – that he artwork moves me in some important way and that it improves my quality of life by viewing it. If the artwork is something you wish to view and have access to for an indefinate period, or if you wish to develop a private or corporate collection to diversify your assets, than owning tends to make the most sense.
Evalutating the Options
1: Why are you seeking artwork? This is perhaps the most fundimental and most important question to ask. Based on the overviews provided above, in most cases I find that for individuals it makes more sense to purchase the artwork, while for businesses, almost without exception, leasing is a better fit. There are always exceptions though – if you are a business consultant or executive who has a rental apartment in another city for work, leasing artwork may make more sense. Likewise if you have a vacation or part-time home where you entertain guests for only part of the year, leasing can be a great option. On the business side, if you are a large bank or law firm with a privately currated collection and looking for art as a diversification of assest, than buying very well may be the more sensible option. If you are seeking art for pleasure or investment purposes, I would most oftewn suggest a purchase. If the nature of your need is more decorative, than I would lean towards leasing.
2: How long do plan to have the artwork? For many individuals and collectors, the answer may be forever, which supports a purchase decision. This may also be the case for a business, perhaps the owner is struck by a particular piece that he wants to have over his desk so that he can enjoy it forever. On the other hand, for temporary needs, such as seasonal business offices, home staging projects, etc... being able to have artwork only when needed presents a tremendous benefit. Likewise for hotel lobbys, medical reception areas and residential buildings, the people who come and go tend to change over time, so there is a value in being able to change the surroundings from time to time (seasonally, anually, etc...)
3: How much of a factor is cost? If I'm dealing with someone new to collecting who is looking for a piece or if I'm working with a property manager who has a fixed budget, than price can play a major role deciding to lease versus own work. For the individual, they may want to test the work out in their home before making a commitment to it. Even then, perhaps an installment plan makes the most sense. With the property manager, there may be a piece that fits their price range, but typically I'll recommend a lease as it will provide the most cost-efficient solution when you factor in the tax benefits and not needing to spend on long term maintainance and upkeep of the work.
4. Is maintainance and upkeep going to present a challenge? As mentioned in the section above, there is a cost to maintaining artwork. If the work is photo-sensitive (such as photography, prints and watercolors), it's important to gauge the amount of sunlight the artwork is exposed to over time to prevent fading and loss of color.
Other Considerations:
Installation. Whether the artwork is going to a private residence or to an office complex, there may be a need to involve a professional art installer. If the piece is small and the client wants to hang it themselves, I can often devise an arrangement where they pick up the artwork from the artist or from a local studio. While they avoid the installation costs by doing so, they are liable for any damage to the work the moment they take possession of the work. For larger or more delicate artworks, or situations that require a more complex installation, I always suggest using insured art installers. With a purchase scenario, typically there is a one time installation cost. With a lease it's important to consider that there may be an installation cost each time the work is rotated and/or removed. I have found that on average, expert installers charge around $75 per hour and there may be an additional cost if they need to rent a vehical for transport or if the job requires more than one person.
Framing, Matting and Other Preparations. Framing, mounting, printing, matting and other preperations are also worth considering when leasing versus owning work. For leases, cost is often more of a factor so I like to work with “gallery wrapped” pieces that don't require framing as this will reduce the cost. For scenarios where framing is required, I have some relationships which allow me to rent frames along with the work. For purchase scenarios, it's always the client's option and I can have the work framed and matted as required, but often the buyer will have their own resources they wish to use.
Shipping and Crating. If the artwork is fragile, unwieldy and traveling long distances or overseas, transporting the work can become a significant cost consideration. As with installation, it's important to keep in mind that if you're purchasing the work ideally you'll only need to transport it once. If the artwork is leased, it will need to be returned at some point.
Insurance. For lease scenarios, it is not typically a problem to list the work under an existing policy (general liability for a business or home owners for individuals). Occasionally it may require a rider, depending on the value of the work and the coverage provided by the existing policy. With a purchase and for more expensive leases, it may be worthwhile to investigate an art insurance policy. These policies can become expensive, so it's helpful to talk with an expert. I have worked with and can recommend the team at DeWitt Stern for art-related insurance needs.
I hope this has been helpful and I am always happy to answer any questions about the subject to the best of my ability, and to direct you to other resources or specialists if needed.
