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Archive for October, 2007

Equipment: Lease versus Purchase

Should you or should you not buy your equipment? Often at times, we are faced with the decision of whether to simply purchase the office equipment we need or lease it for the time being. Depending on your needs, there are upsides and downsides to both leasing and purchasing. Before deciding one way or another, consider how long you will need your equipment, the cost, the returns on purchase or lease investment, etc. Basically, use efficiency, economy and cost-effectiveness as your criteria for deciding whether to lease or to purchase your equipment.

Purchase

If you have a long-term use for the equipment, purchasing it is the better option. Leasing an item of equipment that will be a fixture in the office for a long time coming could be more expensive because you will end up paying more than its actual price after a couple of years’ lease.

Consider also the warranty that comes with new equipment. A warranty is convenient because you can get a replacement for defective equipment or parts as well as free service. Since office machines are used round-the-clock most of the time, they have a tendency to either go totally kaput or act up once in awhile; you need this warranty to ensure a quick, as well as an economical resolution to equipment problems.

Leased equipment usually does not come with a warranty; you may get preferred service but this, you usually have to pay and wait for. When you lease equipment that turns out to be defective, you could end up waiting in line until the company has the time to check your machine and get it working for you – a common problem with leased equipment repairs. This in turn, could drastically affect work flow in the office.

Lease

If you will need the equipment for only a short period of time, leasing is the way to go. There is no point in purchasing equipment that you only need for several months because equipment value always depreciate. Thus, even if you sell your equipment after just two months from the purchase, you will still lose money.

In some cases, however, leasing equipment may be better than purchasing it – even if you will need it for a long time. If you have limited capital and have many things to spend money on, you might find leasing to be the better alternative. This is true if other expenditures have more priority than equipment.

To illustrate, let us suppose that you have started your own cakes company on a shoestring budget. Of course you need professional ovens, but you also need money for supplies, rent, employee salaries, and advertising. In this case, you may lease your ovens first. Once you have a steady income from your business, you may decide to purchase the ovens that you need.

When you lease your equipment, you can also upgrade as newer models come. With purchased equipment, you’re pretty much stuck with it for as long a time and your resources allow. Leased equipment lets you request a newer model as it comes and keep you apace with the changing times.

Unfortunately, however, leased equipment is usually used equipment. This may mean drastically reduced performance and output unless the company from whom you leased the equipment has a good maintenance crew and program.

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