Buying vs. Leasing Office Equipment
- July 20, 2016
- Comments Off on Buying vs. Leasing Office Equipment
Determining whether to buy or lease office equipment is an obstacle met by many business owners big or small. There are so many factors to be considered such as: the equipment’s lifespan and depreciation; the steady advances in technologies, company growth, costs, usage, maintenance, tax deductions and more.
Let’s dive into each and determine what to consider before purchasing or leasing and the pros and cons of one option versus the other.
Checklist of things to consider:
✓ Maintenance history
✓ Usage frequency
✓ Purpose of purchase
✓ Technological changes
Pros of Purchasing Office Equipment Outright
1. As soon as you make that payment, you are in complete control. It’s easy.
The equipment is now yours. You’ve spent the money, you don’t need to think about repeat payments. If you’ve factored in depreciation and lifespan then you know if this option is viable or more importantly will be a good return on investment.
2. The maintenance is up to you.
This ‘pro’ can land under both purchasing and leasing depending on the terms of a lease. Having the maintenance be up to you can either work for you or against you depending on the leasing contract. Sometimes a lease requires you to pay for unnecessary maintenance yearly that may not be necessary, and sometimes the lease requires the company leasing you the equipment to pay for all necessary maintenance. This is definitely worth noting when deciding to lease versus buy.
3. Tax incentives.
As a business owner, you are entitled to fully deduct the cost of some newly purchased assets in the first year.
The Downside of Purchasing Office Equipment
1. High initial cost.
Office equipment, although necessary can be expensive. Paying upfront to own, often requires the usage of lines of credit or investors capital – funds that could be used elsewhere to help grow your business.
2. You’re very quickly stuck with outdated equipment.
Technology becomes outdated quickly. Depending on the industry you’re in, a growing small business may need to refresh its technology every year or two. Purchasing office equipment up front often forces you to either be stuck with equipment that is not up to par or to have to sell equipment at a fee that is way less then you paid for it.
Checklist of things to consider:
✓ Terms of contract
✓ Monthly cost and your budget
✓ Customer service of the business leasing you the product
Pros of Leasing Office Equipment
1. Up-to-date equipment.
Leasing allows you to continuously keep your equipment up-to-date. The producers of printers, copiers and other tech equipment continuously come out with new products that are better then the one you bought the year before. Leasing allows you to pass the burden of out-of-date technology to the company that is leasing you the equipment.
2. Smaller upfront costs and manageable monthly expenses.
When leasing a product, you often have to pay nothing upfront and your monthly fee is set allowing you to budget accordingly. Also allowing you to invest money in human capital to grow your business.
3. Trial and error – acquiring the best equipment for your business.
Leasing enables you to try products short term and decide if they are right for your business. There is nothing worse then purchasing a new piece of equipment and realizing that no one in the office uses it and that you need something different.
The Cons of Leasing Office Equipment for Your Business
1. More expensive overall.
Leasing office equipment is almost always more expensive in the long run. For example: A printer may cost $5,000 and last 10 years with very little maintenance. Leasing on the other hand may only cost $200 a month, however, in two years at $200 a month you have already spent close to $5,000 on the same printer.
2. You are required to abide by the lease.
If you purchase a piece of office equipment and then realize you don’t use it, you always have to option to sell it and loose a bit of money, however, if you sign a two year contract on a printer you are obliged to pay that monthly fee for two years regardless if you use/like the equipment or not.
3. Leasing equipment often comes with credit checks and paperwork.
Taking out a lease involves at paperwork and often credit checks. Although this isn’t usually an issue, it does involve time.
There are a few simple rules that may help you decide whether to lease or buy as both have there advantages and disadvantages. If your equipment requirements are small and you have the capital, then purchasing may be the option for you. It is more straightforward and you’ll save money in the long run. However, if you are a start up and are unsure of the equipment that is right for your business, leasing might be up your alley. A large sum of cash can often be better used somewhere else – you can’t lease employee capability.