To Lease or Not to Lease…..That is the Question!

If William Shakespeare’s Hamlet didn’t know the answer, then how should you?

 All joking aside this is a question I get a lot. The difficulty most customers have is they are working with someone who has incentive to push them in one direction or another. I am here to give it to you straight. As someone with a finance background who has been in the print space for a decade and a half I’ll arm you with the tools to make an informed decision.

 The Benefits of Leasing:

 Conservation of Capital

With a lease, a customer’s (or lessee’s) capital is not tied up in equipment or system costs. It’s free to be spent on other items such as additional staff, technology, or personnel.

 100% Financing

Leasing allows customers to finance up to 100% of the equipment cost plus certain “soft” costs such as maintenance, delivery and insurance right in the lease, minimizing up-front cash requirements.

 Fixed Payments

Customers can lock-in payments now while avoiding the risk of rising interest rates in the future and simplifying the budgeting of monthly cash flows.

 Flexibility

Leasing allows customers to structure payments to fit their budget. We offer a variety of traditional and customized structures to meet a customer’s needs.

 Easier Cash Flow Forecasting

Fixed monthly payments help customers budget money into the future.

 Purchase and Renewal Options

At the end of the lease, customers may choose to purchase the equipment, upgrade to a new system or continue to lease via an ongoing renewal of their contract.

 Obsolescence

Leasing keeps equipment and systems up to date. As a business grows, the equipment or technology may become obsolete or outdated. Leasing offers customers the flexibility to upgrade to new and better technology to match their current and future needs.

 Tax Advantages

Leasing allows customers to deduct monthly lease payments on a true lease as an operating expense.

 The Challenges of Leasing:

 You will spend more over the life of the lease

Ultimately, leasing is almost always more expensive than purchasing. For example, a $5,000 copier would typically cost a total of $5,760 if leased for three years at $160 per month, but only $5,000 (plus sales tax) if purchased outright.

 You still have to keep paying even if you stop using the equipment

Depending on the lease terms you typically must make the entire stream of payments even if changes in your business happen. For instance; if your business was closed due to COVID over the last 60 days you would probably still be responsible for those lease payments.

 End of Lease

When the contract expires it can sometimes be both costly and confusing if you don’t know EXACTLY what to do next. This is often when people sour on the leasing concept, but a good business partner will make sure your interests are protected and proactively start discussions with you 6 months prior to having to make a decision to give you all of the options.

 The Benefits of Paying Cash:

 Typically easier than leasing

The reality is leases require paperwork, credit checks, signatures, and in some cases company financials and personal guarantees. Lease terms can be complicated to negotiate, and if you don't negotiate properly, you could end up paying more than you should or receive unfavorable terms.

 You call the shots regarding maintenance. Equipment leases often require you to maintain equipment according to the leasing company's specifications, and that can get expensive. When you buy the equipment outright, you determine the maintenance schedule yourself.

 The Challenges of Paying Cash:

 The initial capital layout might exceed liquidity. Your business may have to tie up lines of credit or cough up a hefty sum to acquire the equipment it needs. Those lines of credit and funds could be used elsewhere for marketing, advertising or other functions that can help grow your business.

 Eventually, you're stuck with outdated equipment. As I mentioned earlier, copier technology becomes outdated in time. A growing small business may need to refresh its technology in some areas every 36 months. That means you are eventually stuck with outdated equipment that you must donate, sell or recycle.

 Now that you’ve explored the pros and cons of leasing and purchasing you should be armed with the information to guide your decision. The lease versus purchasing decision is about how (financially) you do it. The key is that you need to accomplish 3 critical things:

 1.    Determine the acquisition method (HOW)

2.    Get the equipment that meets your company needs (WHAT)

3.    Are your HOW and WHAT aligned with your business (WHY)

 This article focused on the first bullet of HOW. Stay tuned for the follow up on #2 and #3 - WHAT AND WHY ARE JUST AS CRITICAL.