Which Makes More Sense — Buying Or Leasing Computers For My Business?
In the 21st Century, every business owner will, at some point, be faced with the difficulty of whether they should buy new computer equipment or consider IT hardware leasing.
This issue is not an easy decision to make, and it will depend on several factors from what you use your computers for (e.g., graphic design or accounting) to your cash flow situation.
It is advantageous to weigh the pros and cons of both buying and leasing options in the context of your particular business before you make that final decision.
Before You Begin
First consider the benefits & downfalls of business computer leasing and buying. Take a moment & ask yourself the following questions:
- How will you be using the computer equipment?
- Which operating systems and software do you need?
- What requirements are necessary for your business in terms of compatibility with IT equipment?
- Do you prefer PCs or Macs?
How will your business tech needs change as your business grows?
Computer Leasing Benefits
1/The Latest Technology at Your Fingertips
I. Technology is changing at a rapid rate, and your computer equipment becomes obsolete within a few years.
II. Computer leasing ensures that you have the latest technology available in your business, which makes it easier for you to keep ahead of your competition and improves the productivity and efficiency of your staff.
III. It also means that disposing of and replacing old equipment is not your problem. You can get the latest technology each time your lease expires.
IV. Often, leasing companies will even allow you to upgrade before the end of your contract for a small fee.
V. Having the latest equipment was cited as the number-one benefit of leasing by 65% of respondents in an Equipment Leasing Association survey.
2/No Unexpected Expenses
I. Business tech equipment leasing makes it much easier to budget & control expenses, which stabilizes your business.
II. No unexpected maintenance & IT costs. Simply call your leasing company for any hardware or software problems.
III. Very few computer leasing companies require a down payment, which means that should you need a new piece of IT equipment to keep up with developments in your industry, you can do so without dipping into capital or disrupting the monthly cash flow of your business.
Computer Leasing Downfalls
1/Higher Overall Costs
I. Leasing computer equipment is more expensive in the long run.
II. If, for example, you lease a $4000 computer for three years at $160 a month, you will end up having paid $5760 instead of just the $4000 if you bought it outright.
2/You Don’t Own the Equipment
I. Once the lease is over, you do not own the equipment.
3/You Are Tied to Monthly Payments
I. You are obliged to make payments for the entire lease term.
II. Most leases have a cancellation fee so that you have the option to cancel should you no longer need the equipment or should your business change direction.
Computer Buying Benefits
1/You Own the Equipment
I. It belongs to you and is an asset that is tax-deductible according to Section 179 of the IRS code.
2/Less Complicated Than LeasingI.
I. Less complicated paper works.
II. No need to specify how and where the equipment will be used, and there may be restrictions on this.
III. If you don’t find a reputable leasing company, you may see lease terms challenging to negotiate and may well end up paying more than you should.
3/You Call the Shots
I. You are in the driver’s seat regarding upkeep.
II. Equipment leases often oblige you to maintain equipment concurring with the leasing company’s requirements, and that can get costly.
III. When you purchase the equipment outright, you determine the maintenance schedule yourself.
- Your equipment is tax-deductible. Section 179 of the IRS code allows you to withhold the total expense of recently bought assets, such as computer equipment, in the first twelve months.
Computer Buying Downfalls
1/Capital Outlay Upfront
I. Large capital outlay is probably the biggest downfall of buying computer equipment that may put unnecessary strain on your business.
II. Depending on what stage your business operates, you may want to use the lines of credit available to you for advertising and marketing or other things that would help your business grow.
2/Stuck with Redundant Technology
I. If you buy your computer hardware and software instead of leasing it, you may find that you are stuck with equipment and tools that are outdated, which could be a significant disadvantage to your business, especially if you’re a small business.
II. It could reduce your business’s ability to compete in the market you operate in, and it is rather costly.
- You have the most control over the management of your technology resources when you buy your computer equipment and tools.
- Depending on the business you’re in, you could use the business tech equipment you purchase for years to come.
- With a lease, you may lose some control over the management of your resources, but you always will have access to the latest technology, and your business operations will be more streamlined and less stressful.
- The equipment is delivered and maintained and can be upgraded at any time, meaning that you spend very little, if any, time managing the equipment or worrying about it.
- This strategy allows you to focus on the success of your core business rather than on the equipment you need to make things happen.
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