The next time your business needs new computers, networking equipment or other technology, should you buy it or go for printer rental London? If you don’t know, read on. This month we’ll take a look at the benefits–and downsides–of both leasing and buying technology equipment, plus the questions you should ask to ensure you get the best deal.
Leasing: The Benefits
- Leasing keeps your equipment up-to-date.Computers and other tech equipment eventually become obsolete. With a lease, you pass the financial burden of obsolescence to the equipment leasing company. For example, let’s say you have a two-year lease on a copy machine. After that lease expires, you’re free to lease whatever equipment is newer, faster and cheaper. (This is also a reason some people prefer to lease their cars.) In fact, 65 percent of respondents to a 2005 Equipment Leasing Association survey said the ability to have the latest equipment was leasing’s number-one perceived benefit.
- You’ll have predictable monthly expenses.With a lease, you have a pre-determined monthly line item, which can help you budget more effectively. Thirty-five percent of respondents to the Equipment Leasing Association’s survey said this was leasing’s second-highest benefit.
- You pay nothing up front.Many small businesses struggle with cash flow and must keep their coffers as full as possible. Because leases rarely require a down payment, you can acquire new equipment without tapping much-needed funds.
- You’re able to more easily keep up with your competitors.Leasing can enable your small business to acquire sophisticated technology, such as a voice over internet protocol (VoIP) phone system, that might be otherwise unaffordable. The result: You’re better able to keep up with your larger competitors without draining your financial resources.
Leasing: The Downsides
- You’ll pay more in the long run.Ultimately, leasing is almost always more expensive than purchasing. For example, a $4,000 computer would cost a total of $5,760 if leased for three years at $160 per month but only $4,000 (plus sales tax) if purchased outright.
- You’re obligated to keep paying even if you stop using the equipment.Depending on the lease terms, you may have to make payments for the entire lease period, even if you no longer need the equipment, which can happen if your business changes.
Buying: The Benefits
- It’s easier than leasing.Buying equipment is easy–you decide what you need, then go out and buy it. Taking out a lease, however, involves at least some paperwork, as leasing companies often ask for detailed, updated financial information. They may also ask how and where the leased equipment will be used. Also, lease terms can be complicated to negotiate. And if you don’t negotiate properly, you could end up paying more than you should or receiving unfavorable terms.
- You call the shots regarding maintenance.Equipment leases often require you to maintain equipment according to the leasing company’s specifications, and that can get expensive. When you buy the equipment outright, you determine the maintenance schedule yourself.
- Your equipment is deductible.Section 179 of the IRS code lets you deduct the full cost of newly purchased assets, such as computer equipment, in the first year. With most leases favored by small businesses–called operating leases–you can only deduct the monthly payment.