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The Computer Leasing Explained
People who have started shopping for a computer may be asking themselves “what is computer leasing?” Thankfully, there is a simple answer to this question.
What is Computer Leasing?
The term “computer leasing” is used to refer to a situation where a person rents a computer from a leasing company. The company owns the computer while the person or people renting it get to use the machine.
Leasing equipment is favored by businesses as it means that they do not have to spend their capital on expensive computers. Rental contracts keep down the cost of equipment and just about anything can be leased.
What is Computer Leasing: How to Get Started?
Before consumers start looking for leasing companies, they should determine how many computers they need. If the business is just starting out and only needs one computer, they may be better off buying it outright. However, bigger companies will find that leasing is the more sensible option.
A study has shown that approximately 80% of US companies lease at least one piece of equipment. The reasons that make leasing so popular are listed below.
The repayments are lower than what one would get with a loan or hire purchase
The interest rate is fixed as opposed to floating
The company can benefit from tax advantages
Retaining working capital
Avoiding making a down payment
Gaining quick access to the latest business tool
Leased equipment shows up on income statements as a lease expense not a purchase. When companies purchase a computer, they become less liquid.
Are There Any Downsides to Leasing Equipment?
With all the benefits to leasing equipment, one must be wondering “are there any drawbacks?” Yes – consumers pay a higher price in the long-term. Leasing equipment also commits the business owner to a piece of equipment for a specified time frame. This can be a problem if the business is in flux.
As every leasing decision is unique, business owners must take the time to review their lease agreement. It would be prudent to compare the cost of the lease to the cost of current interest rates on loans. While consumers are doing this, they should ask themselves the following questions.
Are the rates favorable?
How much will the lease cost the business?
How much will the business save if they choose to lease instead of buy?
Is leasing cheaper than buying the exact same piece of equipment outright?
It is worth noting that start-ups often have difficult time leasing equipment. If this is the case, consumers will need to look for a lease provider which is prepared to take their personal credit into account.
Overall, if leasing is the more financially feasible option, businesses will not regret their decision. Computer leasing is a wonderful way to get access to a top of the line computer. If consumers are unhappy with their lease, they can always terminate it by paying a small fee.