December 15th 2014
Leasing-Equipment

Today’s IT Directors face a familiar question when looking to bring in new hardware: lease or buy? It’s an age-old question, but an increasingly hot topic. Technological advancements mean that there’s increasing pressure on businesses to provide modern, high-performing hardware for their employees – but, with the economic climate of recent years, the lifecycle of most hardware, by necessity, has lengthened.

Leasing hardware has become an increasingly attractive alternative – and the general consensus tends to be, ‘If it depreciates, lease it. If it appreciates, buy it.‘ In this article we’ll take a look at some of the pros and cons of leasing and buying hardware.

Leasing

Businesses have used leasing as a way to acquire business items for years – from photocopiers and fax machines to water coolers and company cars. In recent years, an ever-growing number of leasing options has emerged, giving businesses the power to lease their entire technology solution if they so wish.

Let’s take a look at some of the pros and cons of leasing.

Pros

No up-front outlay. Perhaps the most obvious benefit of leasing is that you don’t have to cough up money up-front to pay for equipment. You’ll get the flexibility to stagger your payments over a period of time – and, in the mean-time, you’ll be able to use the equipment.
Predictable expenses. Leasing hardware means paying one predictable monthly fee, with no nasty surprises, such as unexpected repair bills if the equipment were to break down. This makes it easier for you to budget.
Keep up with the latest technology. As soon as your lease agreement is up, you’re free to lease the latest equipment (usually at no increase in your operating costs.) This gives you the scope to keep on top of the latest technology and, crucially, keep pace with your competition.
Scalability. Most lease agreements give you the scope to upgrade as necessary. So, whereas you might buy hardware that can’t keep up with your growth over a 2-3 year period, leasing gives you the power to be much more agile and adapt to the changing needs of your business.

Cons

Expense. Leasing is highly convenient from a payment point of view but, as with most lease agreements, you’ll often pay out more in the long-run.
No re-sale value. One of the major reasons you might opt against leasing is if you’re bringing in equipment which will grow in value, or at least hold value well, over a period of time. If you could sell the product on after you’ve finished using it, it may be better to consider buying. You can then sell the product and offset some (or all) of the acquisition cost.
Fixed terms. Certain agreements will require you to keep on paying even if you stop using equipment so it’s important to read the small print!

Buying

Pros

Easier. From a process point of view, buying is often less complicated than leasing. As well as no small amount of paperwork, you’ll sometimes have to work hard to negotiate favourable lease terms, whereas buying simply requires you to identify a product, work out a price and the deal is more or less done.
Responsibility for maintenance and upkeep. Leased equipment often needs to be maintained according to exact specifications under the terms of the agreement, which can be prohibitively expensive. When you buy equipment, it’s up to you how you keep it maintained.

Cons

Technology moves fast. It’s hard to keep up to date with the latest technological trends, and this is doubly so when you’ve laid out large sums of money on procuring equipment. Typically, once you’ve bought it, you’re pretty much stuck with it for as long as it’s financially viable – by which time your competitors may be using the latest and greatest technology, giving them a critical head-start.
Up-front expenses. It goes without saying that the actual expense of buying products can be an obstacle. You can mitigate these by using credit or payment terms, but these can be hard to negotiate and can lead to you paying over the odds over time.
Unpredictability. With the best will in the world, you can look after equipment like a pro, but occasionally, technology will break down. It’s inevitable! If you own your equipment, your only option is to pay for it to be fixed, which can cause problems with your budgeting and cash flow.

Lease or buy?

Ultimately, there’s no universal right or wrong answer to this question. There are plenty of variables to consider and each case should probably be judged on its merits. With that said, it’s easy to see why leasing is becoming an increasingly attractive option – simply because it gives businesses the power to be agile and flexible in adapting to the needs of an ever-changing world.

There are many things to consider when making this decision, but the key advice is to consider your needs carefully, always negotiate the best possible deal (whether leasing or buying!) and constantly.

Opex or Capex? Cloud or On-premise? Contact one of our experts at Lloyds IP for a free consultation on 01744 414141 or enquiries@lloyds-ip.co.uk