To Lease or Not to Lease Technology

The debate on leasing or buying cars has been going on for a few decades.  There are pros and cons when it comes down to each individual’s specific situation and preference.  A similar debate has occurred in the technology arena with the choice between leasing or purchasing equipment, such as computers, networking equipment, servers, and much more.

Below is a list of the advantages and disadvantages of each option:

The advantages of buying:

  • Simplicity – you find it and buy it.  You don’t have major paperwork to fill out or terms to negotiate.
  • Lower long-term costs – you don’t have to pay the interest rates that you do with a lease.
  • Maintenance is up to you – you don’t have a leasing company deciding your maintenance schedule, which sometimes can be more than you would do yourself and can become more costly.
  • Tax advantages – any new assets can be deducted on your tax return.

The disadvantages of buying:

  • Upfront capital expenditures – computer equipment can be expensive and when purchasing equipment you may have to invest a significant amount of money upfront or turn to a line of credit to pay for it.
  • Old technology – with technology advancing so rapidly, equipment quickly becomes outdated – requiring you to purchase new equipment and figure out what to do with the old equipment.
  • Unpredictable issues – if your equipment is faulty and your warranty has run out, you are stuck with it.

The advantages when you lease technology:

  • Up-to-date equipment – when you sign a two-year lease for a server, for example, once those two years are up, you can lease a newer server and the leasing company takes back the older technology.  Signing short-term leases allows you to up-date your technology more often.
  • Lease-to-own options – some leases will offer the opportunity to purchase the equipment after the lease expires.
  • Predictable expenses – leasing allows you to pay a monthly fee for your equipment and easily budget for it.
  • No capital outlay – with a lease, you don’t have a huge outlay of money at the beginning like you do when you purchase equipment.  You are able to spread the expense out over time.
  • Gain a competitive edge – you are able to leverage more advanced technology than if you had to pay the full purchase price up front.  The more advanced technology should provide you with the ability to operate more efficiently and effectively and therefore be more competitive.

The disadvantages of leasing:

  • More expensive in the long run – leasing a piece of equipment and paying monthly fees that include interest will cost more money over the long run than paying the money upfront to purchase it.
  • Obligations – if you stop using the piece of equipment for one reason or another, you must continue to pay your monthly fees until your lease expires.

Determining the option that is right for you will take some research.  You need to consider whether you will be using this equipment for the long-term or whether it will be outdated quickly and you’ll need a newer model.  This will help you decide when to lease technology.  You also need to evaluate your financial situation and determine if you have the cash to purchase it now, have credit options available or need an option that spreads the cost out over time.

There are many things to consider in the lease vs. buy decision, so it is important to do your homework.  Learn more about fair market leasing;check out another article on the benefits when you lease technology.

There are many things to consider in the lease vs. buy decision, so it is important to do your homework.

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