Next time your business needs new computers, networking equipment or other technology should you rent IT equipment or purchase it? If you are in a dilemma then read on. Let us understand the benefits, and downsides of IT hardware rental keeping in mind whether a purchase decision is a worthy move or not.
Leasing- The Benefits
- Leasing keeps the apparatus up to date- Over time, equipment such as computers and other devices become outdated. With IT hardware rental you can pass on the burden to the leasing company. An example is if you have a two-year lease on a copy machine, after two years you can lease a new, faster and cheaper equipment
- Predictable monthly expenditure- With a lease, you’ll have a set monthly line item that makes it easier to manage your finances.
- You do not pay anything upfront- Many businesses struggle with cash flows and need to keep the coffers as full as possible. With IT hardware rental, no down payment is necessary, and you can buy new equipment without using your own money.
- You are able to keep up with your competitors- Comparing IT hardware leasing vs. buying the former appears to be a better option. The reason is that it helps small companies to acquire sophisticated forms of technology.
Buying- The Benefits
- It is easier than renting- buying apparatus is easier than rent IT equipment. Leasing out equipment requires in-depth lease work as leasing companies often ask for detailed financial information. Even the leasing terms can be complex to negotiate. If you do not negotiate properly you may end up paying more.
- You call the shorts regarding maintenance- the leasing terms often specify you
- maintain equipment according to the specifications of the leasing company– when you purchase equipment yourself you determine the maintenance yourself.
Pose the right questions
Irrespective of the fact whether you are opting for IT hardware leasing vs. buying the right questions need to be posed.
- Which is the type of lease you are looking to sign- a capital lease or an operating lease- a capital lease is like a loan and equipment is considered to be an asset and you avail the benefits like tax appreciation. In an operating lease, the leasing firm keeps ownership while the equipment is treated as a monthly operating expense for tax purposes.
- Is there a buyout option- you have a choice between fair market value and a buyout option. If you are fairly certain that you want to upgrade to new technology when your lease expires opt for the fair market value option
- What are the terms of the lease? Normally lease runs for 24, 36 or 48 months. The longer you lease the lower your monthly payments. However, you may end up paying a considerable sum of money during a long lease.
- Is it necessary to have the equipment insured? Some leasing companies demand that you have the leased equipment covered. If you don’t, the monthly payment may increase to meet insurance costs.
- Is it possible to terminate the lease early- what happens if you do not need the lease early or you are looking to upgrade to newer technology no sooner than later? Check out whether you can pay off your lease early.
Following a few golden rules will help you decide whether to rent IT equipment or purchase it. If your equipment requirements are small and you have the money then it is better to purchase. But on the other hand, if you have a substantial requirement then it is better to opt for IT hardware rental. There is no reason to splurge a lot of cash in buying when that money can be used for the development of your business.