Is leasing a more cost effective option than buying technology in today’s economy?
We wanted to 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.
Why should I lease rather than buy my equipment?
If you’re a startup looking for cost-effective kit, or a business looking to scale up whilst managing expenditure and accessing the latest tech, then whether you buy or lease can have an impact on remaining cash flow positive and reaching your growth goals.
Beyond just weighing up the overall costs of buying or leasing your equipment, you’ll need to consider cash flows, tech support, what tax deductions you can get, flexibility and more.
If you use equipment that needs to be updated regularly, then leasing can provide access to updated technology quickly and easily. To most businesses that take the leasing route the ability to have the latest equipment tends to be high on the list of perceived benefits.
Often the leasing company will have access to a wide range of products to meet customer needs or they may chose to focus on particular brands or specialist technology to tailor what they offer.
Normally you can pick whichever device fits your business best. Perhaps you are a creative agency and prefer the large screen of an iMac, or maybe you are looking for that iPad to help in the kitchen of your restaurant so staff can multi-task. As customers we all have unique requirements dictated by how we want to run our business, the sector we are in and the role that technology plays.
Leasing can be used to mix and match devices throughout your business, so that your team can perform at their best to the benefit of your customers.
Leasing can enable your small business to acquire sophisticated or specialised technology that you would probably not be able to afford to buy outright, especially if you are at an early stage of development.
You're better able to keep up with your larger competitors without draining your financial resources to invest in equipment, giving you time to build the momentum in your business.
There is less expense up-front with leasing because you have predictable payments that make it easier to budget and manage your cash flows.
And from a financial perspective there are tax deductions allowable on leasing, something to refer to your accountant on and check against your Annual Investment Allowance.
Another consideration is accessibility to capital. If your business is restricted in its available lines of credit for capital expenditures and your supplier will provide you with equipment on a lease plan, then this could help you grow at the time you need it most.
As a business you should always look for the most flexible lease deal, so if you want a good balance of keeping pace with the digital world and an affordable monthly rate select a supplier that is prepared to work with you to get the right balance for your business.
Remember though you don’t own the equipment. But often a leasing company may offer a buy-back or trade in deal at market price that would be calculated typically 90 days before the end of the lease agreement.
Ultimately you own the equipment, so you can make any alterations or changes you feel is necessary. You are also fully responsible for all maintenance and repair costs.
As an asset of the company, you can of course sell the equipment at any time allowing you to recover some of the initial cost or potentially trade it in for buying newer models.
Buying can sometimes be easier because you don’t have to deal with signing agreements and contracts.
It could also be that as a business you have not been trading long enough for a leasing company to agree to provide you with financing, so at an early stage buying may be your only option.
Buying the equipment means that you will have a higher initial cost that needs to be taken into account on how you plan your cash flows.
As with any purchase it can be difficult to pay for all your equipment needs all at once. Cash flow may be limited or may be you are facing a period of ups and downs and don't want to invest a large amount of money just yet.
If your business is going through a growth phase, and needs extra resources there is an inherent risk in buying rather than leasing if the demand falls back to lower levels and you use up limited cash reserves.
Sometimes businesses have to settle for a second best choice of equipment because it is a lower-cost outlay and you could not immediately afford what you really wanted.
For technology that is outdated quickly, you have to decide if it is worth continuing to use it, repair it, store it or sell it as time goes on.
Asking the Right Questions
Any business needs to consider the potential revenue derived from a piece of technology, how quickly it will become outdated, the size of the equipment and the overall ongoing maintenance costs.
If you're thinking about leasing equipment, you'll need to do your homework to ensure you get the best deal.
Here are a few questions that'll help you get started:
- What type of lease are you being asked to sign?
- Is there a buyout option?
- How long is the lease for?
- Does the equipment have to be insured?
- Can I add to the lease?
- Can I terminate the lease early?
Why tie up cash in a purchase when you could use that money to establish or grow your business?
Check that the supplier can bundle your leasing deal with an effective IT support plan, to keep you and your company productive and downtimes to a minimum.
Work.Tools provides affordable plans for leasing the latest in technology offering small and medium-sized businesses with the personal touch when it come to IT support, IT services and IT consulting.
We aim to help you save money and professionally manage your technology needs with the latest Windows, Apple and Google devices at affordable monthly rates.
We provide a comprehensive range of tech products and support services to keep your business productive. With software licenses, mobile contracts, cyber security, and cloud storage solutions we’re your peace of mind when it comes to technology.
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