Leasing Vs. Buying: The Lowdown
When investing in the latest equipment for your business you have two options, Lease or Buy. Below we look at the pro’s and con’s of each.
“Konica Minolta Bizhub C364e”
“5 Dell Precision T3610 workstations”
All in all, you need about £12,000 to upgrade your IT and office equipment. Which is more cost-effective – shelling out £12,000 upfront or leasing them at £40.93 per week?
Your company is planning an out-and-out campaign a month from now, and you need every bit of cutting edge technology on that sheet you’re staring at. You’re worried. Not that your business can’t handle the expenses. But at the end of the day, £12,000 is a lot of money. Downgrading to equipment with lower specs is out of the question. You ask yourself: “Do I have any other options?”
If the scenario above rings true for you, you’re not alone. And fortunately, you do have another option – leasing.
“But isn’t leasing more expensive in the long-run?”
True. However, taking the costs at face-value does not give you an objective view on whether leasing or buying is better for your specific situation. Let us weigh up the PROs and CONs of both sides…
Why Rent Or Lease When You Can Buy!?
Without a shred of doubt, buying your own office equipment has numerous plusses. But while buying costs almost always prove to be lower in the long run than leasing costs, purchasing assets have other significant plusses that go beyond pure monetary value.
Ownership – this is one of the BIGGEST advantages of buying. This is especially true for assets that have a long shelf-life. You own the equipment 100% and it’s up to you what you do with it.
You can use it in your business for as long as you deem necessary. If you want to sell it and re-invest the money on other equipment, that’s perfectly fine. You can even opt to rent it to other businesses for additional income and financial power. Plus, there are no terms or contracts to keep an eye on – such is the freedom afforded by buying brand new equipment.
Having said that, buying equipment outright also carries a downside. Here are the CONs that a shrewd business owner should factor-in before shelling out massive amounts of cash for brand new office equipment:
Higher Initial Expense: If your company is running low on financial resources, shelling out 5 to 6 figures to get brand new equipment is out of the question. You see, product or equipment ownership comes with a hefty initial expense – and this can put your business’ finances and stability at risk.
End of Life Cycle: “Boss, I think PC number 10 has seen enough action. It can’t even render our poster.” As the business owner, what do you do with the old hardware? Unfortunately, if you bought your own, well…you’re on your own! And we’re not just talking about trying to recoup as much as you can from your heavy investment.
You and your organisation are responsible for disposing of the equipment in an environmentally appropriate way – ensuring that you comply with the local government’s rules and regulations. Moreover, you are also responsible for removing and destroying ALL of the confidential information that may have been stored on that equipment.
More Upkeep And Maintenance: So you bought a new workstation? That’s nice. But to get the most out of it, you have to ensure that it’s running on the latest software and is constantly updated with patches.
Printers and photocopiers are no different. As the owner, you always have to keep an eye on the paper tray and ink cartridges to ensure you have enough to handle the day’s printing and document production needs.
Buying gives you total control and ownership of that asset. But with ownership comes great responsibility. From upgrades, troubleshooting, maintenance, to patches and everything in between, you have to take care of ALL of these. Usually, this means extra expenses. But what’s worse (especially for SMBs / SMEs), this takes valuable time away – time that you can spend in developing your business.
Depreciation: In the business world, there’s a basic rule of thumb that goes – “If it appreciates, buy it. If it depreciates, lease it.”
Depreciation is and will always be a major concern for businesses deciding between buying and leasing. Computers, printers, photocopiers, A/V gear – just about any technology equipment suffers from drastic depreciation in value. With manufacturers always on the lookout for ways to make technology faster, better, and smarter, that PC, tablet, or projector you bought is almost guaranteed to be obsolete 3 to 4 years (or even less) from now.
Before you shell out hard-earned money for brand new equipment, always ask yourself: “How much will this laptop, tablet, or workstation be worth in 3 to 4 years from now?” If you don’t have a clear answer or if the only option you can think of is to resell it at a far lower price, perhaps it’s ’round about time to strongly consider leasing.
Leasing – The Perfect Solution To Your Equipment Woes?
If higher initial expense; depreciation of value; and greater maintenance responsibilities are factors that concern you, looking into a photocopier lease or MF printer lease could be the most promising route. For some businesses as you’ll see later, the flexibility of leasing has been instrumental in their survival and success – allowing them to keep up with the competition without burning a hole in their pocket.
True, leasing might cost more than buying in the long run, and you, as a business-owner, need to stick with the signed contract or agreement. However, business owners find that the advantages of leasing far outweigh the minor disadvantages. Let’s take a look at some of the niceties afforded by leasing.
Greater Flexibility And Scalability: Running a business is hardly a smooth-sailing affair. Changes and the need to adjust will crop up sooner or later. Perhaps you need to get MORE of the equipment you’re using to keep up with the growing demand. Maybe you need to drastically change what your business is doing to cope with your industry.
Whatever the case may be, leasing affords you greater flexibility and scalability – allowing you to adapt to changes with minimal time and effort from your end. Let’s say you need a faster photocopier or multi-function printer. Lessees only need to notify their leasing company to update their contract and upgrade their equipment.
On the other hand, if you bought your current photocopier just a year ago and you need to upgrade, not only will you have to shell out a hefty amount for the new machine…you also have to wrap your ahead around how to recover your previous investment.
Lower Upfront Cost: Unlike buying, leasing allows you get the latest IT gear and office equipment you need minus the 4- to 5-figure expense. When you go down the leasing route, it will only cost you the first lease payment to get things moving.
True, in the long run, leasing almost always cost more than paying for the equipment’s value upfront. However, the former lets you hang on to that cash – making it easier to manage your business’ finances and invest your resources on profitable ventures and campaigns.
Easier Maintenance: At the end of the day, the ultimate ownership is retained by the leasing company – giving them total control of what to do with the equipment. However, this could be a HUGE advantage to the lessee. After all, it is in the lessor’s best interests to keep the asset in tip-top shape.
This allows lessees to fully benefit from the comprehensive maintenance programs and support services offered by companies like COS Sales. It’s always nice to have the equipment and the maintenance part taken care of in one swoop.
Easier To Keep Abreast With Ever-Advancing Technology: Let’s say you’re running a TV and film production company – a business that relies heavily on cutting edge technology. The typical jobs that such a company handles require audio / visual equipment; lighting and sound systems; high-end cameras; computers and everything else in between.
Often, business-owners think that purchasing brand new equipment is the best way to go – trusting that buying new business tools and equipment (and the lower costs in the long run) would keep their profit margins healthy.
But alas, by the time the equipment had recouped the costs and started to turn a profit, they were rendered obsolete by newer and better versions and had to be replaced. This is when business-owners learn a tough lesson: As soon as you buy brand new equipment, it starts to depreciate.
If this sounds true for your case, worry NOT – you are NOT alone in facing this dilemma. Companies who heavily rely on cutting edge technology always have to think about how to dispose and replace the once-new equipment. And it only gets even more problematic when you factor in depreciation.
Leasing, on the other hand, makes it easy for business-owners to stay toe-to-toe with their competitors in the technology department…without burning a hole in their pockets. Long-term lease contracts last anywhere from 3 to 5 years, which is ’round about the same time technology gets an upgrade.
Here’s an example: Let’s say you lease computers for your company with a term of 3 or 4 years. At the end of the contract, the leasing company takes back the old computers and you can now sign-up for a new term with newer and better computers.
Lessees can rest easy – confident that, once their contract expires, they can sign a new leasing contract for the latest technology. And best of all, they don’t have to lose sleep in trying to figure out how to dispose of or replace obsolete equipment.
Both leasing and buying will have their supporters. Both have their share of advantages and disadvantages. For most businesses however, especially those who have to walk a tightrope in this financially-stressful time, leasing seems to offer more advantages – most of which go beyond pure pound-value.
Buying new equipment outright is out of the question
Minimising paperwork and spending more time growing your business is a priority
And if your business relies in ever-changing technology
…Leasing might be your best bet. If you would like to learn more about how leasing can benefit your business, please give us a call on 0208 527 4000 or use the quick quote button below.
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