Renting Vs. Leasing for Office Equipment
Every business, whether large or small, requires basic office equipment. All business offices have a need to track customers, generate invoices and statements, communicate with customers and suppliers, handle letter correspondence, perform accounts payable and balance checking accounts. Some businesses require specific tasks such as job estimating, payroll, desktop publishing and audio/visual media presentations. Whether it is better to lease or purchase the office equipment with which to complete these tasks requires weighing several factors.
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Budgeting Considerations
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Leasing provides a known, consistent expense that makes it easy to work into a monthly or yearly budget plan. Also, not needing to come up with the money all at once to buy equipment is valuable if your cash flow is low. Making an outright purchase, however, only requires a one-time budget expense. Buying equipment can be done on time by taking out a bank loan or placing the purchase on a credit card, but these options incur the additional cost of interest.
Tax Considerations
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One factor in deciding to lease or purchase office equipment is the impact each would have on taxes. Generally, you want whichever option will yield the largest tax benefit. When equipment is purchased, its value can be depreciated over a period of time. You cannot take a depreciation deduction if you are leasing. However, you can deduct lease payments. If you plan to lease the equipment for more years than the IRS allows for depreciation, there may be a tax advantage to leasing.
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Useful Life Considerations
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Fax and copy machines usually provide many years of service. A computer, however, may become obsolete or not able to handle your growing business's needs three years from now. Leasing high-technology equipment ensures that periodically you can give back the item and replace it with an up-to-date model. A cable company, for example, may charge a $3 a month lease fee for its modem. Although a modem may be purchased for only $100, leasing ensures that you'll have the latest technology, and you may be able to upgrade the device should a new model be released. By leasing, you are also assured that knowledgeable service personnel are available should you have any difficulty with the unit.
Changing Needs
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The needs of your business may change suddenly, making an office product unable to do the tasks you require. If you own the equipment, you will have to get rid of it by either donating it or trying to sell it, but at least you have the option to buy new products. Some leases tie the user to the particular equipment for a specified length of time, locking you into that equipment. You may not be able to terminate the lease without incurring fees.
Read the Fine Print
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Understand the terms of any lease before you sign. You may want to have a lawyer review the lease. Know if there are any up-front deposits required, who is responsible for maintenance and repairs (either accidental or intentional), the expected condition of the equipment when it is returned, and if there is a purchase option at the end of the lease.
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