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By Line Gade on March 09, 2021

Buying vs. leasing hardware - pros and cons and how to decide

Hardware is an essential part of giving your customers or members the best experience. Additionally, your staff will use hardware on a daily basis to do their tasks.

But should you buy or lease your hardware? Find out here where we share pros and cons and how you make the right decision that suits your business. 

 

 

Leasing hardware - pros and cons 

What does it involve when leasing your hardware? When leasing you make a contract with the leasing company. In the contract, you agree on a monthly fee, term of notice, maintenance, leasing period and the like. All in all, your payment is spread over time.

 

Pros of leasing hardware

Always-up-to-date

Always up-to-date

When leasing your hardware, it is easier to update your equipment to be the latest, fastest and the best on the market. For instance, in most cases when leasing hardware, you sign a leasing contract for a limited time. When the leasing contract expires, you can update your hardware to a newer solution.

Fixed-monthly-fee

Fixed monthly costs

You avoid the frustrations regarding extra expenses on your hardware. With a leasing contract you always know the monthly costs as they are fixed. This can create more stability in your finances.

Maintenance-and-repair

Don’t worry about repair or maintenance costs

Often, it is possible to make a leasing agreement where the repair or maintenance cost is included in the monthly fee. That is a huge advantage, as you don’t have to worry about extra cost if your hardware needs repair or maintenance service.

Cashflow

Better cashflow

When leasing your hardware, you avoid the large pay-out when acquiring the equipment. This gives you a better cashflow, because you can split up the payments.

Always-up-and-running

Always up and running

You don’t have to go without hardware for days or even weeks when sending your hardware for repair or maintenance. Often, you can sign a contract where you get a stand-in hardware while your own is being serviced which means you can keep up the work.

Ahead-of-competitores

Stay ahead of your competitors

Leasing gives you the opportunity to go for the premium solution because the immediate cost is smaller compared to buying. That gives you a competitive advantage, as you can get the hardware that suits your business, staff and customers best.

 

Cons of leasing hardware 

Higher-total-cost

Higher total cost (maybe)

In some situations, the total cost of leased hardware will be higher compared to buying the equipment and paying upfront. However, you have to be aware of what is included in the monthly leasing fee. If maintenance, service and the like is included in the leasing contract, it makes it more difficult to compare the total costs of buying and leasing, as more than just the hardware is included in the leasing price. 

Terms-of-notice

Term of notice

If you have to get out of a leasing contract, you have to be aware of the term of notice. It will defer from contract to contract and can be anywhere between a few months to a year. During the notice period, you still have to pay the monthly fee - even if you are not using the hardware.

 

Buying hardware - pros and cons

What does it involve when buying hardware? It is pretty simple. You pay the full price from day one, and then you own the equipment. This means you decide everything regarding the hardware – e.g. maintenance, lifetime etc.

 

Pros of buying hardware

Faster-buying-process

Faster buying process

It is faster to buy than to lease. When you want to buy your hardware you just decided what you want and then buy it. Often, leasing entails more paper work and details, as the leasing company needs to know more about you before making a contract.

Full control of maintenance

Full control of maintenance

You decide when it is time for your hardware to get a maintenance check. It is up to you if you want to postpone it or forward it.

Deductible-costs

Deductible costs

Depending on tax regulations in your country, you might have the opportunity to deduct the full cost of your new hardware in the first year. When leasing, it is only the monthly fee you can deduct.

Affordable-solution

The most affordable solution in the long run

The total cost of acquiring hardware will be less when you buy your hardware compared to leasing in the long run. It is due to the fact that you pay for administration and the like when leasing.

Full-ownership

Full ownership

You own the hardware and you can do whatever you want with it. If you want to resell it or loan it out to someone, you can. You decide.

 

Cons of buying hardware

Liquidity-demand

High liquidity demand

It requires a large sum of money to buy hardware. If money is tight, it could affect other operations in your organisation where the money was needed – e.g. marketing or other functions. Otherwise, you might be forced to take a loan to pay for the hardware. In that situation you will have to pay interests.

Outdated-hardware

Stuck with outdated hardware

When buying your hardware, you are stuck with it for a longer period, as it might take some time to save up money for new and updated equipment.

Fast-depeciation

Fast depreciation

Hardware loses value very fast. Of course, you can sell it after a few years when you have to buy an upgrade, but the value will have decreased rapidly, compared to when you bought it.

 

Overview of pros and cons

 

Pros

Cons 

Leasing hardware

  • Always up-to-date
  • Fixed monthly costs
  • Don’t worry about repair and maintenance costs
  • Better cashflow
  • Always up and running
  • Stay ahead of your competitors
  • Higher total cost
  • Term of notice

Buying hardware

  • Faster buying decision
  • Full control of maintenance 
  • Deductible costs
  • The most affordable solution on the long run
  • Full ownership
  • High liquidity demand
  • Stuck with outdated hardware
  • Fast depreciation

 

How to decide between leasing and buying hardware 

It is quite obvious that there is pros and cons for both leasing and buying hardware. The decision all depends on your circumstances and your overall preferences.

When you have to decide between leasing and buying hardware, as a guidance you can ask yourself the following questions:

 
Buy
Lease
In what degree will a here-and-now hardware investment impact your liquidity?

Low degree

High degree

How do you anticipate your hardware needs to evolve? 

Low to none evolvement

High evolvement 

How important is the operational reliability of your hardware?
Less important Very important
How is the competition in your industry?
Less competition Hard competition

 

NB: You might experience that some of your answers to the questions will be in a grey zone. You can use this table to get an idea of you are leaning more towards buying or leasing your particular hardware. 

Published by Line Gade March 9, 2021