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Buy or Lease Computer Equipment? What Works Best?

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Having current computer technology is a necessity for all businesses, but when the time comes for the big update, do you hire or buy?

In the following article, we’ll look at some of the pros and cons of both decisions and consider what impact each may have on your organisation’s financial future.

The advantages of leasing

Stay current: Leasing is a great way of staying up to date. Remember that all computers and tech machinery have their best-before dates; with a lease you can simply return that equipment back to the leasing company when those dates fall. If you have a three-year lease on a photocopying/printing suite, when that date expires you’re free to check out newer, faster kit.

Stay on top of outgoings: Leasing’s costs will be laid out as you need them to be, and this forecast can be integrated into your financial strategy, helping you budget more fastidiously. Extra money can be saved should you elect to pay nothing up front, which is particularly advantageous to firms on tight cash flow.

Without the need for down payment, other items of equipment can be acquired with minimal budget impact.

Keep up with competition: Leasing is a great way of accessing cutting edge technology at cut-price. Impressive and highly useful kit such as a voice over internet protocol (VoIP) phone system, may otherwise be beyond a smaller firm’s reach.

Taking advantage of leasing can be fast, economical track to enjoying the same benefits as the market’s big guns.

The disadvantages of leasing

Ultimately, you’ll pay more: As with any finance deal, leasing comes with a price and is almost always more expensive than paying outright for the same stuff.

Depending on lease terms, you may be obligated to continue payments until the lease period expires, even if that equipment is no longer in use or no longer needed. This isn’t an unlikely eventuality either – many businesses will go through fundamental changes as they adapt to their changing market landscape.

The benefits of buying

Simplicity: Making the purchase is an easy transaction. Once you and your team have decided on what’s needed, you make your research and buy. Leasing, on the other hand, means paperwork and potential financial assessments headaches.

You may be asked your reasons for wanting the equipment, the answers to which may require effort and document sourcing.

Furthermore, lease terms can be tricky to negotiate. If these negotiations do not run smoothly, you could end up paying more or getting lumbered with unfavourable terms that are difficult or impossible to break free from.

More control to you: When equipment is leased, leasing companies often lay the burden of tech maintenance at your door, obliging you to keep that equipment to working standards that comply with the company’s specifications. This situation can get a little expensive.

If machinery is bought outright, all those updating and maintenance issues are in your hands, meaning you take on or put off financial incursions as you see fit.

The disadvantages of buying

High initial outlay: Buying costs are steep to begin with and can easily spiral if not tempered by a clearly developed financial strategy. Considerable sums may have to be put forward to cover entry level equipment needs – funds that could be put to much more productive use if channelled to other departments in the business, such as marketing or advertising.

Update burden: Of course, it’s your kit, so you’re responsible for updating it, which again can incur high costs. Technology ages rapidly in our forward-leaning society, meaning smaller businesses will undoubtedly start to feel the pinch as respective departments and staff cry louder for a tech refresh.

Then there’s the issue of taking care of the IT equipment that’s on the way out – do you donate, sell, recycle, or hollow units out to make a cyber-punk umbrella stand? Either way, it’s your profit or loss.

Before you take the plunge

A few simple guidelines should help you make the big decision on whether you need to lease or buy. If your business requirements aren’t too high tech, you have good cash flow, or you can get a low-interest loan, then buying will get a lot done with minimal fuss. Also, you’ll save money in the long run.

On the other hand, if you’re looking at a pretty big equipment haul – maybe you’ve just onboarded a new fleet of workers, or expanded your operations – then leasing could well make more financial sense.

 

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Tags: Business, Digital Transformation