Advantages And Disadvantages Of Computer Leasing
Are you in the initial stages of starting a business and somewhat dismayed by the costs associated with getting a new workplace up and running? Thankfully, there are a number of financial programs and options that can mitigate the sticker shock a bit. In this article, I will examine one of them – computer leasing – and help you decide if it’s right for your new venture. As we all know, there’s no doing business in the modern world without the aid of computers (unless you’re Amish), so you need the hardware. Let’s just see if we can get it to you at a fair price.
Computer leasing, for the uninitiated, works much like any other lease – a lending company makes a capital investment on an object, whether it be land, an automobile, or office equipment, and then the leaser signs a contract to use the object and pay regular payments towards its cost. At the end of the lease contract, the leaser has the option to make a final payment towards the cost of the object and claim permanent ownership of it.
Computer leasing is an excellent choice for a small business because it mitigates the initial capital outlay necessary to get an office up and running. Hardware costs may be falling, but when you factor in software licensing, servers, networking supplies and all the other necessities for a digital office, it can still be quite expensive to get up and running. Leasing allows new business owners to spread that cost out as a monthly expense.
Even better, there are several financial advantages to computer leasing in all stages of the business cycle. Typically, the Internal Revenue Service allows a full 100% write off of computer equipment payments on a 10% or FMV lease. This can be a major deduction come tax time. In addition, most computer and technology leases do not carry a prepayment penalty, so if the liquidity of the business improves, you are allowed to pay off the lease early with no extra charges.
One concern that many businesses have with computer leasing is the constant onward march of progress – nobody wants to be stuck in a lease with equipment that is behind the technology curve. Most reputable leasing companies will allow you to pay off the remainder of the lease amount as a deposit on new hardware if upgrades are necessary. Thus, a business owner can continue rolling leases forward, keeping their office equipment up to speed with their competitors without making a great capital investment.
