Leasing vs. Buying Computer Hardware

[DonBlack]

I run a small business and was considering taking out a lease on some computer hardware. I can afford to pay cash and buy the stuff. However, I was hoping someone could point out to me the pros and cons of leasing instead. I know how car leasing works and the tax benefits that come from it for small business owners. Anyone here lease computer hardware? Any good URLs? Thanks!

 

[Modus]

Leasing just means your capital/assets don't increase because you never really own the product. That's a tax benefit that must be balanced against the long term cost of the (usually high) monthly payments and the loss of any resale value.

Modus

 

[marcio]

I considered leasing. There are too many issues involved, so I think the best bet is to consult your accountant. Roughly, you might want to lease if you have other business loans, to improve cash flow, or if your total equipment purchases would greatly exceed your section 179 election (this is because the IRS depreciation schedule might be longer than the lease term).

One major difference that many people don't realize between leasing a car and leasing a computer is that computers depreciate at a very rapid rate. A 4-year computer might not have any market value, so payments for leasing or financing a computer for 4 years might have the exactly same monthly payments, if the interest rate is the same. However, you don't get to keep the 4-year old leased computer unless you pay the buy-out amount, but you do get to keep the 4-year old financed computer.

 

[jcovercash]

don't lease. nuff said

 

[Dhruv]

I'm still in college so don't know about real world business as yet, but couldn't he..

build his own systems cuz prices are so damn cheap right now, let say it costs him 500 bucks per system w/o monitor cost. Couldn't he write it as 2000 bucks per machine w/o monitor (he can say that labor was something astronomical like 1500 bucks per machine- even tho he did it himself), won't that help cuz its a reported loss and he can get tax advantage?

 

[marcio]

Well, when you have your own business, try doing that and then tells us how the IRS audit went...