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As a business owner, you can’t run your company without computers. However, the prospect of buying expensive machinery for all your employees can seem daunting—especially when you’re first starting out. Leasing equipment seems like a convenient way to get around this expense. But is leasing too good to be true?
Here we’ll go over the pros and cons of leasing and buying equipment. Armed with this information, you can make the best financial decision for your business.
Leasing is convenient and largely worry-free. This option offers several advantages over buying.
Costs Less Upfront
When you lease electronic equipment, you don’t have to pay anything upfront. Leasing companies don’t usually require a down payment—you just have to make monthly payments. With leasing, you don’t have to collect a large sum of cash to spend on electronics before your business has even had a chance to turn a profit.
Easy to Upgrade
The computer industry changes and evolves every day. New products come out every year, if not every few months. With regular software updates and hardware upgrades, how do you keep up with the curve?
When you lease your equipment, you don’t have to worry about losing money on old machines. When you’re ready for the latest and greatest, you just turn in the old stuff and pick up the new.
Leasing also protects you from buying equipment that turns out to be unsuitable for your needs. If you end up not liking the equipment you chose, you can swap it out at the end of your lease period for different models. Some companies might also offer a trial period so you can be sure your electronics match your needs.
Deductible from Taxes
If you lease electronic equipment for business use, you can often deduct it from your yearly taxes. Your payments are considered business expenses, so with tax deductions, the overall cost of your lease will go down.
Easier than Taking out Loans
If you don’t have the money you need to buy all your equipment, you might be forced to take out a loan. The loan process can be confusing, stressful, and complicated. You have to undergo credit checks, deal with interest rates, and still make monthly payments. With leasing, you can skip the banks and get to work.
Despite its convenience, leasing does have several downsides.
Costs More Overall
Since you’re not paying for the equipment itself, you’ll never own leased computers. Similar to renting an apartment instead of buying a house, you’re throwing money toward something that will never be yours. As such, the overall cost of leasing equipment is greater than buying. You save upfront, but spend more long-term.
Ties You in to Contracts
When you lease equipment, you are bound to a lease agreement. These contracts can last anywhere from two to four years. While you’re under contract, you can’t always upgrade your equipment or terminate the agreement without paying penalties. These costs add up.
Although leasing might seem easier at first, buying offers some long-term benefits you can’t get with a lease.
Costs Less Overall
Buying computer equipment requires a large amount of money upfront. However, once you pay for your electronics, you’re done. You don’t have to worry about monthly payments, contracts, or never-ending bills. Although you will have to take care of regular maintenance and repairs, you won’t spend years giving money to someone else for computers you’ll never own.
Belongs to You
Obviously when you buy equipment, it’s yours. Your computers belong to you, and you don’t have to follow someone else’s rules for using them, updating them, or maintaining them. You don’t have to answer to a leasing company, and you control which company you choose to handle repairs, backups, and maintenance.
Deductible from Taxes
Just like leasing, you can deduct the cost of computer equipment from your taxes. Some tax incentives make it possible for you to deduct the cost of new equipment up to a certain amount. Check with your accountant to find out if you qualify for these incentives. If you do, you can lower the total cost of your equipment.
Although your company will build more assets through buying than through leasing, buying your equipment does have some disadvantages.
Costs More Upfront
Although buying will save you money long-term, you still have to come up with that initial sum.
Difficult to Upgrade
When you own your own equipment, it costs more to upgrade it than with a lease. Rather than just switch out the old for the new, you have to sell or trash your old stuff and come up with the money for all-new models all over again.
Whether it’s best to lease or buy equipment comes down to each company’s individual situation. Keep this information in mind when you choose new computers for your company.