You want to be certain with leasing or buying your tech equipment, and we’ve got several sure-fire ways to contend with it.
Leasing: The Strong Points
Leasing is initially cheaper than buying. You don’t have to put down a large sum of money. With leasing, you have fixed monthly expenses.
Another money-saving perk of leasing is maintenance-free tech equipment. You don’t need to hire in-house tech support. The company you lease from often provides ongoing maintenance, updating, training, and even technical support.
Leasing’s number-one perceived benefit is the ability to have the latest equipment, according to a survey done by the Equipment Leasing Association in 2005. Access to the latest technology allows you to easily keep up with your competitors. Also, the ability to exchange items is a great way to test items out or make use of machines that you only need temporarily.
There are certain tax advantages that come with leasing. Most lease payments are fully deductible per annum. Keep those receipts close by.
Leasing: The Shortcomings
The downside of leasing being initially cheaper is it’s more expensive in the long run than buying, because of the reoccurring monthly payments. The monthly payments for leasing are a blessing or a curse depending on the cash flow of your business.
Leasing payments are liabilities as oppose to purchases, which are assets. Liabilities decrease company value. Assets increase company value.
You have the obligation to pay for the entire lease term, whether you need or use the item is irreverent. You’ll have to pay what was agreed upon in the contract terms.
Buying: The Strong Points
Buying your tech equipment is cheaper in the long-run than leasing, because it’s a one-time purchase. There are no monthly service fees.
The tech equipment you buy are considered assets, thus increasing company value. You won’t have debt (the leasing monthly payment), which is seen as a liability.
Buying offers a better tax deduction than leasing. Section 179 of the IRS code lets you annually deduct the full cost of newly purchased assets as opposed to leasing (where you can only deduct the monthly payment amount).
Buying: The Shortcomings
In the beginning, buying your tech equipment is expensive. You need a large sum of money. This is not good news for small businesses.
You will be in charge of maintenance. You will need to maintain or hire IT support. If you do hire IT support, it’s an added fee.
Buying means you’re stuck with purchases. Technology becomes obsolete very quickly. You will have to update frequently or use outdated equipment.
Before you lease, familiarize yourself with the ten most common major equipment leasing contract terms which are featured in Inc.com’s Equipment Leasing article. Even if you think you won’t lease now, it’s good to know. The article states that, “The Equipment Leasing Association of America estimates that 80 percent of all companies lease at least some of their equipment.”
To talk more about leasing, or anything else, please contact us. We’re always happy to assist you. Thanks.