When setting your business budget, the cost of buying office equipment may prove costly. This is why many business owners opt to lease IT equipment instead; not only is it a cost-effective option, it also means that you will not have to worry about upgrading your old equipment. With the relentless advancement of technology, IT equipment becomes obsolete within a few years as new gadgets take over. Leasing IT equipment means that you have the option of renegotiating the deal and upgrading the equipment to the latest version simultaneously.
While the benefits of leasing IT equipment are obvious, many new business owners are unsure about the process of entering a leasing agreement. In fact, many opt to buy equipment rather than go through the hassle of leasing. However, the leasing process is quite simple if you know what to look for:
Type of lease
Most leasing companies will either offer you a capital or operating lease. A capital lease is much like a loan, which means that the equipment will fall under assets on the balance sheet and you will enjoy benefits like tax depreciation. In the case of an operating lease, ownership of the equipment is retained by the leasing company; the equipment is considered operating expenses rather than assets. Operating leases are usually preferred since they don't tie up your funds and have shorter terms of about 3 years or less.
Length of the lease
Leases for IT equipment usually run between 2 and 4 years, with longer leases having lower monthly payments. However, it is important to note that you will probably end up paying more over time with a longer lease.
Insurance
Depending on the leasing company, you may be required to insure the equipment. In such a case, you would need to find out about coverage against damage or loss from your insurance agent. Note that a company that does not require you to directly insure the equipment may increase your monthly fees.
Lease termination
Ensure that you discuss the lease termination policies with your vendor, since you may need to opt out earlier. Find out whether you have the option of ending the lease early, and how much it would cost you if you did. This is crucial since you may need to upgrade to better technology sooner that you expect. It is also important to find out what happens once your lease expires. Some vendors will simply expect you to return the equipment, while others allow you to renegotiate your lease or even purchase the equipment if you are satisfied.
Buyout options
Once the lease expires, you may be allowed to purchase the equipment for its fair market value (FMV). Some companies offer a 1 dollar buyout option, where you get ownership of the equipment for 1 dollar once your lease expires. FMV leases generally have lower monthly payments than the alternative. In addition, the 1 dollar buyout option would not be ideal if you intend to upgrade to the latest technology once your lease expires.
Most equipment leasing companies make room for negotiations. As such, it is advisable to shop around for the best deal before you settle on one vendor to lease IT equipment from.
If you need to lease IT equipment in Malaysia or Singapore, visit Lease IT Equipment.
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