Office Equipment: Leasing vs Buying

How do you know which option is best for your business?

Although you can operate without certain luxuries, there are unavoidable costs to running your business and the equipment required to do so. Determining whether to lease or to buy office equipment varies on your company’s situation. You’ll have to factor in your true business needs and weigh the pros and cons between the two purchase options.  Here’s a glimpse at what to expect.

What to decide

Leasing Office Equipment

Advantages of Leasing
  • Less up-front cost
    • Leasing can give your company an edge when purchasing new equipment, as it allows you to save on the high up-front cost.
  • Better Equipment Options
    • With less restriction on high up-front cost, you may not be as limited in the type of equipment you can choose from.
  • Flexible Terms
    • Leasing allows you to limit unexpected expenditures and budget your expense with a monthly payment over a longer period of time.
  • Tax Deductible
    • Lease payments are often 100% tax deductible which can reduce the net cost of your lease.
  • Maintenance may be Included
    • When you lease equipment, a maintenance agreement can be included in the configuration to allow for service/maintenance coverage all in one invoice.
Disadvantages of Leasing
  • Higher Cost Overall
    • Leasing equipment is almost always more expensive overall than it would be purchasing outright.  Most leasing options can require interest to be paid.
  • Restricted to Term of Lease
    • When you enter into a lease agreement, you’re obligated to the length of your lease, even if you decide you no longer want to use the equipment.  Usually there are cancellation provisions with an agreement, but early termination fees apply.
  • Give up Ownership
    • With leasing you won’t own the equipment, so unless the equipment has become obsolete by the end of your lease the lack of ownership means there is no option to sell or earn money back.

Buying Office Equipment

Advantages of Buying
  • Ownership
    • The most appealing advantage to buying equipment is ownership, especially when your equipment has a long life expectancy and is most likely to withstand technological advancements.
  • Complete Control
    • You make the decisions with the equipment, no need for permissions, can make any alterations as you see fit, and do not have to wait for issues to be addressed.
  • Tax Incentives & Savings
    • Section 179 of the Internal Revenue Code provides great advantages if you are eligible.  It can allow you to fully deduct the cost of newly purchased assets in the first year, which could help reduce the net cost.  Although not all purchases are eligible, there are also tax savings in depreciation deductions.
  • No Agreements or Contracts
    • There is no hassle involved finding someone to extend credit, no binding contracts or agreements to deal with.  You can pick what is essential and pay for it outright.
Disadvantages of Buying
  • Higher Up-Front Cost
    • You’ll have the higher initial expense of costly equipment and will need the capital available to purchase.
  •  Responsible for Maintenance Costs
    • Depending on the issues you may have with the equipment, maintenance costs can get pricey.
  • Bound to that Equipment
    • When buying equipment, you risk having to reinvest in newer equipment with advancing technology or potentially being stuck with broken equipment that you can’t sell or return.

Making a Decision

As with any purchase, it’s important to evaluate your options.  Try to evaluate the approximate cost of the equipment, factoring in the tax savings and resale value.  Buying outright may not even be an option so there are a few considerations when deciding to lease.  Consider what is most cost-effective for your business.

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