Although new IT equipment can be ‘nice to have’, sometimes it is essential. Your current equipment could be unreliable and so hindering your staff output. You may have had to shift to a home-working model. Or you’ve been through a growth period and have a set of new employees to kit out or business objectives to meet.
Buying a single laptop every now and again isn’t a big outlay. When you need to buy a PC suite for an entire department or even a whole company, costs can skyrocket.
If you’re in the market for new devices and tech equipment for your organisation you’re probably wondering what the best way to do it is. Do you lease it or buy it outright?
In this article we’ll take a look at the benefits – and downsides – of leasing and buying technology equipment.
The top benefits of leasing technology
1. Keep your equipment up-to-date
New technology is released and updated all the time. In many scenarios, it’s not very appealing to make a significant capital outlay, only for it to become obsolete a short time later. With equipment leasing, the large financial outlay passes along to the lease company who take the hit on the equipment becoming outdated. After your initial lease expires you are free to start the next lease with newer, faster devices as you see fit. New, state-of-the-art equipment could even give you an advantage over your fellow competitors.
If you purchase your equipment you will be faced with whatever depreciation those items will have incurred. You’ll also have to spend time safely disposing of them, whether this is selling devices on or physically destroying items.
2. A regular monthly payment model
With a lease, you have a pre-determined regular monthly payment. This can be very helpful for budgeting and make financial organisation much easier. There are no, or only low, upfront costs, freeing up cash flow.
When you buy equipment outright you not only have to make the large capital investment, but should also plan for unknown ongoing maintenance, repair and replacement expenses.
3. Grow your business
You may be unable to afford assistive technology such as a hosted telephony (VoIP) system on a capital basis. Leasing can open up your opportunities in this respect and support your growth plans. You’ll be able to keep up with your larger competitors without straining your finances.
4. Reduce your tax bills
Lease rental payments attract tax relief for the duration of your contract. At time of publication they are tax deductible against your profits. We can’t offer financial advice about this, but do suggest you speak with your finance professional to discuss the options and benefits in this regard.
5.Schools can offer risk free 1:1 device programmes
Whatever stage of education you provide, you have a responsibility to prepare students for the tech-driven world. Specialist leasing companies have devised innovative parent partnership schemes. These provide pupils with the technology they need to enrich their learning experience – with no risk or cost to the school. We work closely with Lenovo and their Tech 4 Learners programme – find out more here.
Downsides to leasing technology
1.You will pay more in the long run
Leasing is ultimately more expensive than purchasing over time. You pay for the privilege of buying the item over time – as a form of credit. Individual businesses will be able to do an analysis of whether the extra cost over time is of more value to them than paying the cash up front.
2. You keep paying even if you don’t use the equipment
When you sign up to a lease you are obligated to see the payments through until the end of the term – as with any line of credit you’d take out. If you sign up for a long lease you may find your business has changed in structure more than you could have envisaged in this timeframe. However a short lease will likely cost more per month, so you’ll need to weigh up the long term cost differences.
3. Always check the terms you’re agreeing to
When you buy equipment outright you make a list and pay. When you take out a lease you’re expected to meet some requirements. You’ll likely provide company information, financial information and usage details for the equipment. Your lease terms may also include specifics around maintenance and insurance. Read all the paperwork carefully and negotiate to ensure you’re getting the most favourable terms.
A few questions to ask along the way
When negotiating with your lease provider, there are a few questions not to miss:
- How long is the lease? – You’ll typically be looking somewhere from 24-48 months. A longer lease costs less per month but more in the long term and you could run in to the pitfalls of committing to equipment for a long time.
- To what level do I need to insure the equipment? – You’ll need to check what level of cover you’re required to have and if there are any restrictions on how equipment can be used e.g. away from office.
- Can I add to the lease during my term? – Most leasing companies don’t mind if you add equipment to an existing lease. Your monthly payment will then recalculate.
- Can I end the lease early? – If you no longer need the leased equipment or want to upgrade soon than expected can you pay your way out of your lease early? If yes, will you face any early repayment charges?
- Is there a buy out option? – What if at the end of your term you don’t have the need to replace your lease equipment, or it’s an inopportune moment to be making operational changes? Are you allowed to make a payment and keep the items?
- What type of lease is it – operating or capital? – The differences here affect your balance sheet and tax implications. Ask your finance professional for their opinion on what is better for your setup. An Operating Lease is the only type of lease agreement that state funded schools can enter into without prior approval.
To lease or to buy?
The choice is yours and yours alone. At certain times leasing will be the right route for your business. At others, buying outright is the way to go. We’re here to help. We’re experts in technology procurement of all types and can help you work out the financial implications of both models. Get in touch with us today to arrange a chat about what equipment you need.