If you’re wondering if you should buy or lease office equipment for your organization, we’re here to help. If your company is in need of new office technology, the decision to lease or buy will be your biggest question. Both options come with advantages and disadvantages, and there is no one-size-fits-all answer, as organizations will be affected differently by certain decisions.
With this in mind we have put together this short guide to help you figure out what’s best for your unique business situation. Read on to see the pros and cons of both buying and leasing, and which fits best for you organization.
Leasing Office Equipment
Leasing office equipment involves renting essential business tools and assets for a specified period, typically ranging from a few months to several years. This arrangement offers benefits like lower upfront costs, regular upgrades to modern technology, potential tax advantages, and the flexibility to adjust equipment as business needs evolve.
Leasing agreements often encompass maintenance and support services, easing the burden of equipment upkeep for the business. At the end of the lease term, businesses can typically choose to return the equipment, upgrade to newer models, or purchase the equipment at a predetermined price.
Leasing Advantages
- Easier to upgrade equipment: If you use your lease to obtain items that may be outdated in a short period of time, such as computers or other high-tech equipment, a lease passes the burden of obsolescence onto the lessor. You are free to lease new, higher-end equipment after your lease expires. This enables you to stay competitive in your field with the operation of the newest technology.
- Fixed cost: Leasing gives you a consistent monthly budget item. Leases are usually easier to obtain and have more flexible terms than loans for buying equipment.
- Tax deductible: Lease payments can usually be deducted as business expenses on your tax return, reducing the net cost of your lease.
- Less initial expense: You do not need to pay huge sums of money for your office equipment. The primary advantage of leasing business equipment is that it allows you to acquire assets with minimal initial expenditures. Because equipment leases rarely require a down payment, you can obtain the goods you need without significantly affecting your cash flow.
Leasing Disadvantages
- Higher overall cost: Leasing an item is almost always more expensive than purchasing. For example, a 3-year lease on a computer worth $4,000, at a standard rate of $40/month per $1,000, will cost you a total of $5,760. If you had bought it outright, you would have paid only $4,000. However, the monthly payment may be easier for your company.
- Lease Terms: Some lease terms may have minimum lease lengths and required service packages and thus companies may be overpaying. If you stop using the equipment, you may still be required to pay for the entire leasing period. Or you may be able to buy out the rest of your lease.
- Lack of ownership: Lease equipment is not an asset. The inability to consider leased equipment an asset is a disadvantage if you need collateral to qualify for a loan.
Buying Office Equipment
Buying office equipment involves acquiring essential business tools and assets outright through a purchase transaction. This approach requires an upfront investment but offers long-term ownership and control over the equipment.
Purchasing allows customization to specific needs and preferences, eliminating ongoing leasing payments. Additionally, businesses can fully depreciate the value of the equipment for tax purposes over its useful life. However, buying office equipment also means bearing the full responsibility for maintenance, repairs, and eventual upgrades as technology evolves.
Buying Advantages
- Buying equipment may cost Less: If you have cash or credit available it may be wise to purchase the equipment. Especially if you’re confident you’ll be using the assets for a long time. The lifetime cost to buy is usually less than leasing and you can claim depreciation on your taxes.
- Ownership: It is your equipment to do as you choose and there are no leasing terms to consider.
- Reduced Administrative Hassles: Buying office equipment eliminates the administrative tasks associated with lease agreements, such as negotiation, contract management, and equipment returns.
- Asset Value: Business circumstances change. If you no longer need the equipment, you have the option to potentially recoup some of your investment.
- Flexibility and Customization: Ownership gives you the freedom to customize, modify, or upgrade the equipment without having to adhere to leasing company guidelines.
Buying Disadvantages
- Higher initial costs are required: The expense of purchasing office equipment is prohibitively expensive for most people. As a result, it is not a viable solution for all. Even if you want to take out a bank loan, most require a 20% down payment. Borrowing money can tie up credit lines, and lenders may limit your future financial activities to guarantee that you can return your loan.
- Outdated technology: With rapid changes in document management technology, your office equipment will become outdated. Many workplaces pride themselves on offering the latest and greatest in technology to employees and clients alike. While this is a sign of a high-profit margin and a tech-savvy manager, buying new equipment isn’t just for appearances. An office that still tries to run on outdated office equipment will likely deal with setbacks, delays, lowered office productivity, and other problems.
- Distracts from Core Business: Managing equipment ownership, maintenance, and eventual disposal diverts your attention and resources.
- Upfront Risk: If the equipment doesn’t end up being as beneficial as anticipated, you might be stuck with an investment that doesn’t provide the expected return.
- Maintenance and Repairs: As the owner, you’re responsible for the full cost of maintenance, repairs, and servicing. This can be a significant additional expense, especially if the equipment experiences frequent issues.
So, Should You Buy or Lease Office Equipment?
Calculate the expected net cost of an item before determining whether to buy or lease office equipment. Important considerations such as resale value, tax deductions, etc., are to be regarded while calculating. In addition, another thing to think about when purchasing equipment is whether it will become obsolete.
When it comes to buying or leasing office equipment, there are many decisions that need to be made. Often, it helps to have a third-party go over these options with you to help you decide whether you should buy or lease your office equipment.
We Offer Buying and Leasing Options To Fit Your Budget
At Waltz Business Solutions we are dedicated to finding the right solution to help your business succeed. We understand that different situations require different solutions, and we are committed to finding the best one for you. Contact us today and let us help you find the best financing option for your essential office equipment.