Benefits of Leasing or Renting Technology Equipment
To lease or buy technology equipment?
The next time you begin to consider acquiring technology gear like computers, servers, networking equipment or other items, you will probably be approached with a decision…do I lease or rent (called Hardware as a Service or HaaS) this equipment or should I just purchase it outright? Let’s focus on some of the benefits of leasing or renting (HaaS) and why it’s a smart idea.
The benefits of leasing technology equipment:
- Leasing/Renting allows you to keep your network up to date. The reality of technology (and most everything manufactured) is that it eventually becomes obsolete…with technology especially, the equipment degrades all while the demands on the network increase. By leasing or renting your equipment, you pass the financial burden of upgrading a network over to the financing company. You also can add to your lease or rental agreement at any time.
- You’ll have a predictable monthly expense. With a lease or a rental agreement, you have a predictable monthly payment. This allows you to turn your IT spending into an operating expense (like a utility payment) and hold onto your cash…which gives your business more flexibility to re-invest those dollars when and where they are needed. This model will help you more effectively budget and plan for the future. And because this model leverages operating expenses, your lease or rental payments are deductible based on your corporate tax rate.
- You pay nothing up front. Many small businesses struggle with cash flow and must be very careful when evaluating capital investments. Rental agreement require zero upfront cash. In a lease you may be required to put down a security deposit, but it is refundable on the backend of the lease. This flexibility allows you to acquire equipment without depleting your cash or tying up your bank lines of credit.
- Leasing/Renting gives you a competitive edge. Leasing/Renting can allow your business to invest in better technology than you might have otherwise invested in. With more powerful infrastructure, networking gear and/or endpoints your business users will experience faster response and more productivity. That’s a great payoff for smartly using financing to your advantage.
- Leasing allows you to include soft costs in the lease. When you lease you can wrap in soft costs such as professional services or project dollars. The benefit here is that large capital outlays for projects can be easily fit inside your monthly budget and spread out over the term of the lease.
- Renting provides complete flexibility in converting your rental agreement to a purchase. When you rent (HaaS) you can convert the rental agreement at any time during the 36 month period to a purchase. You are credited with 90% of your rental payments toward the preset purchase price. In other words, you are never locked into the rental agreement unless that is your desire for your business.
- At the end of a lease/rental period, you have multiple options. Most leases are 36 months (although you can lease for shorter or longer periods). Rental agreements are for 36 months, but as stated above you can convert to a purchase at any time during the rental period. Your options at the end of the lease/rental period are as follows:
- You can return the equipment with no further obligation – (both lease and rental agreements)
- You can purchase the equipment at for the Fair Market Value (lease) or for two additional monthly payments (rental agreement)
- You can continue renting for as long as you desire for 50% of the monthly payment you have already been paying (lease)
Looking at all the benefits, leasing and/or renting (HaaS) technology equipment is a great vehicle for your business to be able to invest in technology to drive both productivity and financial flexibility into your organization. Let the professionals at Point Capital help you determine if leasing or renting your technology is appropriate for your particular business situation.