Should you lease or buy your electronic equipment?
The FTSE 100 share index soared to its highest closing level since August 2018 at the beginning of the week, with this blue-chip index subsequently gaining 0.4% after hitting a peak of 7772 points.
Apparently, retailers helped to elevate the FTSE from its doldrums, with cheap and affordable brands (such as JD Sports) seeing an uptick in share values as inflation continued to bite hard.
At the same time, businesses across the board are benefitting from increasingly accessible financing and lease agreements, which enable them to reduce their capital investment and optimise their levels of working capital in real-time.
Such agreements can even be used to lease the core tech and electronic equipment that your business needs, but is it right for you? Fortunately, GRENKE has put together a comprehensive guide to inform your decision.
What do we mean by tech and electronic equipment?
The nature of tech stacks will vary from one business to another, so the range of electronic equipment that your venture may require is broad and incredibly diverse.
For example, this includes the computer and networking equipment used within your business, from PCs and routers to laptops for remote working.
It may also include business smartphones for remote workers, sales staff, and tradespeople (depending on the nature of your company), as well as printers, office appliances and even televisions.
Such equipment is notably expensive, of course, and can drive significant startup costs and overheads for businesses when they start trading. So, buying items such as computers outright can represent a considerable financial risk, as it may eat into your cash flow and put the venture at a much higher risk of failure.
The advantages of leasing tech and electronic equipment
With this in mind, leasing your tech and electronic equipment delivers an immediate benefit in terms of minimising startup costs and your initial capital investment as an entrepreneur.
Here are a few of the other advantages to keep in mind:
#1. Leasing keeps your equipment up-to-date
Tech equipment tends to have a short lifespan in the digital age, especially when you consider items like computers, laptops, tablets, and smartphones.
This is due to the relentless pace of technological advancement, which leaves equipment obsolete within a relatively short period of time. On average, you’ll have to replace smartphones and tablets every two years or so, creating a higher capital investment burden that may be hard to meet.
Instead, you could lease such items of equipment on two-year lease terms, after which time you’d be free to upgrade by agreeing a new lease on specified tech items. This ensures that you have the best tech at your disposal at any given time, while reducing your long-term business costs.
#2. Rely on more predictable monthly expenses
If we accept that leasing can reduce long-term capital investment costs, it stands to reason that this practice should also lead to more predictable monthly expenses.
Certainly, you won’t have to factor in planned or unexpected purchases when looking to replace individual items of equipment, while a lease will also provide a predetermined monthly line item that allows for more effective (and accurate) budgeting.
This undoubtedly makes the process of managing your company finances considerably easier over time, without forcing you to cut costs in a way that diminishes the quality of equipment that you use.
#3. Keep pace with your competitors
Given that leasing can unlock access to the latest technology and cutting-edge upgrades, we’d argue that the practice makes it far easier for smaller businesses and startups to keep pace with more established and better resourced competitors.
For example, let’s say that you wanted to invest in and install a voice over Internet protocol (VoIP) phone system, which is incredibly sophisticated and expensive to buy.
If this is unaffordable, however, you can simply enter into a lease agreement to install such a system and bring your business in line with competitors.
Otherwise, attempting to compete with better funded rivals could drain your financial resources, once again leaving you without the necessary cash flow or working capital.
#4. Access maintenance packages
While the maintenance of tech and electronic equipment isn’t a standard feature in most lease agreements, it can usually be factored into the T&Cs as an optional extra.
This is especially the case when dealing with expensive and high-end pieces of equipment, which can cost significant amounts to repair in instances where they break down. Unscheduled repairs can be complex and difficult to carry out too.
We’d definitely recommend taking out an additional maintenance package where possible, as this helps you to further realise the monetary advantages of leasing and minimise the risk of downtime in your business.
The last word – should you lease or buy your electronic equipment?
The business and economic climates are unforgiving at present, and businesses must think long and hard about how they manage their finances and capital investments.
So, although buying tech and electronic equipment offers some general advantages that are worthy of consideration (such as ownership and a reduction in monthly business costs), this is a largely inflexible and inaccessible option for small businesses and one that’s even less viable during an economic downturn.
With these points in mind, leasing is clearly more advantageous than buying in the current climate, especially from the perspective of minimising startup costs andoptimising your levels of cash flow as a brand-new business.