Every office needs office furniture, computers, stationery, photocopiers, printers, scanners and other types of office equipment. While everyone wants to have the highest-quality office equipment, this usually comes at a high cost. Some organizations or businesses are able to come up with the funds needed to purchase office equipment on cash basis, but others can’t. Fortunately, there is the option of renting equipment. The pros and cons of renting or buying office equipment must be analyzed before a decision can be made. Equipment Loans Online can help you procure the equipment you need to run your office efficiently. visit here
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Advantages of Renting Office Equipment
When running a business with limited working capital, you cannot afford to tie up a large fraction of the working capital on equipment purchases. The money can be used in the day-to-day operations to generate more income. The following is a list of other advantages of renting equipment:
1. Low Initial Cost
Equipment rental companies rarely demand a down payment. You just pay the rental for the week, month, quarter or year, take possession of the equipment and use it at the office. When the lease period is about to expire, you can decide to return the equipment or renew the lease. This means that renting equipment comes with low initial expense, which is good for your cash flow.
2. Easy Upgrades
If your office equipment needs change, it is much easier for you to upgrade if you’re renting equipment. After all, you can just let the lease expire and rent a piece of equipment that can meet your needs. This is particularly important for computers because new models with better technology are always being released to the market almost on a daily basis.
3. Tax Deductible Lease Fees
When you rent equipment, you will be paying the lease fees regularly according to the lease terms and conditions. All these payments are tax deductible. When computing your taxes, the lease fees will reduce your taxable income.
4. Flexible Lease Terms
While you can always take out a loan and buy a brand-new office equipment, the loan terms may not be as flexible as those of equipment rental agreements. This is crucial because you might need to negotiate a longer payment period if finances are tight.
Disadvantages of Renting Office Equipment
Every coin has two sides. While renting equipment has many advantages, there are some disadvantages, including:
1. It’s Costly
In terms of overall cost, it is more expensive to rent office equipment. Even with competitive lease fees, the overall cost of leasing equipment for a long period of time can be incredibly costly. For instance, if you lease equipment worth $2,000 for 3 years at a cost of $80 per month, you’ll end up paying a total of $2,880. This means you’ll spend $860 more to rent equipment compared to buying the equipment at a cost of $2,000.
2. Long-Term Contract
Many leases require clients to pay lease fees for the agreed period, even if they stop using the equipment. Only a tiny percentage of equipment lease companies allow clients to cancel leases if business takes a downward turn, but a huge lease termination fee is usually applied.
3. No Building of Equity
When paying lease fees, you don’t build any equity in the equipment. At the end of the lease, you will have to surrender the equipment and get nothing in return.
Buying Your Own Office Equipment
Buying office equipment comes with its own set of pros and cons, and may not be for everyone.
The Advantages of Buying Office Equipment
1. Ownership Rights
When you buy equipment, you’ll get full ownership rights. You can sell it whenever you want or keep it in storage for later use; it’s all up to you. Owning equipment is beneficial if the item has a long useful life and cannot easily become technologically-obsolete.
2. Equipment Depreciation May be Deductible
Depreciation of equipment, wear and tear are all tax deductible, so you can deduct equipment depreciation from your taxable income to lower your tax liability. This is a huge advantage in business. However, not all office equipment qualifies for depreciation deduction.
3. Capital Deduction
Tax law allows organizations to claim up to 25% deduction on new equipment purchases. This means that if you purchase new equipment worth $200,000, you can claim a tax deduction up to $50,000. This means that you will only be required to spend $150,000 of your capital on equipment purchases.
Disadvantages of Buying Office Equipment
1. Get Stuck With Obsolete Equipment
There is pride in ownership, but not if you own office equipment that can quickly become obsolete. If you buy equipment that becomes technologically obsolete a short while later, you will have to spend more money to acquire another high-tech equipment that uses the latest technology.
2. High Initial Expense
Buying equipment can be costly. Even if you get financing, you will still be required to come up with a huge down payment. The high initial expense is the biggest disadvantage of buying office equipment.
After looking at the pros and cons of both buying and renting equipment, you can make your own conclusions. Buying is a great idea only if the office equipment you are planning to purchase cannot become technologically-obsolete in the near future. If you have sufficient working capital, you can also buy your own equipment to save money.
Renting is a good idea if you cannot afford to buy equipment or pay the required down payment. If the equipment you need can become technologically obsolete quickly, renting would be a better option. It is crucial you negotiate a favorable lease agreement when renting equipment to get flexible terms and convenient exit clauses. Since both leasing and buying have advantages over the other, it is recommended you lease some equipment and buy others. For instance, you can buy office furniture and lease computers for your office.