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Companies with heavy volume, a preference to pay as they go, and a need for the latest technology often choose to lease
If an outdated copy machine darkens a corner in your office workroom, it's likely the company opted to buy rather than lease the equipment. With office technologies changing so quickly, companies are often reluctant to purchase pricey equipment that may be outdated before they've paid it off. Today, 80 percent of companies choose to lease rather than buy-everything from phones to fax machinesaccording to the Equipment Leasing Association, based in Arlington, Virginia.
But sometimes buying outright makes more sense than leasing, particularly for companies with the cash on hand. Whether you lease or buy, if you're charged with making the product decision, you're stuck with lots of homework. "It's like cars," says Stephany Wingard, executive secretary for the Huntsville (Alabama) Marriott hotel. "You've got to weigh your options on both sides and decide what suits you best."
Paying As You Go
Leasing offers the same advantage as a family buying a refrigerator on the installment plan. A company can "pay as it goes" rather than face a big upfront expenditure that can tie up capital.
"One of the advantages of leasing is that you can finance 100 percent of the purchase with no down payment," says Albert E. Smith, president and CEO of Canon Financial Services Inc. in Mount Laurel, New Jersey.
Leasing is also a more flexible financing alternative because terms can vary-usually 12-month to 60-month leases-and a company in a seasonal business can request that payments are suspended during its slow period, says Adam Warner, president and chief operating officer for Key Equipment Finance's Express Leasing Services Group in Albany, New York. For example, a school may ask to make payments only from September to June when school is in session.
Another benefit? The leasing option may offer one monthly price that includes all ancillary costs such as software, supplies, shipping, installation, and even training, Warner says. This type of plan may simplify purchasing and inventory for support staff.
Low interest rates make leasing an especially attractive option today. "Basically, in a lease-vs.-buy situation, what you have to look at is the total cost of the equipment, and today...