As our business grows, so does the need to update our technology. Whether you are in the market for a new network, new laptops or multi-function printers, the costs can quickly add up. One option often considered by small business owners is leasing. However, as with all things in life, there are definite pros and cons to consider.
Benefits of Leasing:
Up-to-date: your ability to always have access to the latest and greatest equipment as it becomes available is tempting. In fact, 65% of respondents to a 2005 Equipment Leasing Association survey said the ability to have the latest equipment was leasing’s #1 perceived benefit.
Foreseeable expenses: knowable expenses make it easier for many to manage their monthly cash flow.
Little to no down payment: many leases do not require a down payment. For business owners strapped for cash, it’s music to their ears.
Disadvantages of Leasing:
Pay more in the long run: leasing will usually always cost you more than purchasing.
You fix it: lease agreements typically require that you be responsible for repair or routine maintenance. The leasor, not you, will also dictate the terms of who can repair the equipment which can get expensive.
No deductions: Section 179 of the IRS code lets you deduct the full cost of newly purchased assets, such as computer equipment, in the first year. With most operating leases you can only deduct the monthly payment.
If you do decide to lease, thoroughly research your options before committing. Ask alot of questions such as: How long is the lease for? Is there a buyout option available? Can you terminate the lease early? Are you required to insure the equipment?
Leasing can make sense if you require a substantial amount of equipment. However, if your equipment needs are small and you have the money (or can secure a low-interest loan), then consider just buying it.