Leasing Vs Buying Hardware Equipment

Nov 8, 2021

When your business needs new computers, laptops, or monitors, you have two choices:

Buy the equipment
Lease the equipment

Both options have their advantages and disadvantages, and the key is choosing which is right for your businesses. Here are some of the ups and down to each option to help you with your decision.

Leasing Advantages

Financial Clarity – when you lease equipment, you have predictable monthly expense that you can plan and budget for. This can help with cash flow and gives your business financial clarity

Keeps Equipment Up-to-date – Technology is constantly changing, and computers and other tech equipment eventually becomes obsolete. When you lease, you can upgrade machines once the lease-term is over without having the financial burden of the obsolete equipment. Therefore, you can stay up to date with the changing technology without having to incur the financial burdens of old, out-dated machines and equipment.

It doesn’t tie-up funds in an outright purchase – Leasing spreads the cost over an agreed period, therefore, you don’t have to tie-up large funds in the outright purchase of equipment and so it can help with cashflow.

Tax Deductible – Lease payments can usually be deducted as business expenses on your tax return, reducing the net cost of your lease.

Leasing Disadvantages

You pay more eventually – When you lease an item, you will end up paying more for it overall than if you bought it outright.

Obligation to Pay for Entire Lease Term – When you take out a lease, you’re obligated to pay the entire term. So, even if you stop using the equipment, you’re still obligated to pay at until the term is up.

Buying Advantages

It’s easier than leasing – When you buy an item, you simply decide what you want and purchase it. However, leasing involves at least some paperwork, as leasing companies often ask for detailed, updated financial information. They may also ask how and where the leased equipment will be used.

You own the equipment – Therefore you can make any alterations necessary and use the equipment exactly how you wish to use it.

Tax benefits – Depending on the equipment you buy and the country you’re in, there are some tax incentives for buying new equipment. For example, in the UK from 1 April 2021 until 31 March 2023, companies investing in qualifying new plant and machinery assets will be able to claim:

a 130% super-deduction capital allowance on qualifying plant and machinery investments, including computer equipment and servers
a 50% first-year allowance for qualifying special rate assets

Buying Disadvantages

Initial cost for equipment may be high – Your business will likely have to pay large upfront sums when you buy equipment outright, and this money may not always be available. You will also have the opportunity cost then as the funds could have been used for marketing or advertising instead to help grow your business

Eventually you’re stuck with outdated equipment – We already know technology is constantly changing and evolving, and sooner or later, the equipment you bought will be old and out of date.

Have to maintain and fix the equipment yourself – unlike leasing, if your equipment breaks, you’ll likely be responsible for fixing it and this can be costly (unless it’s covered by a warrant), and time consuming.