How Much Does it Cost to Lease Computer or IT Equipment?
Last Updated: June 07, 2023
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IT equipment is expensive. It seems like you go out and buy the latest and greatest products on the market. Then, just a few years after there's a newer, better product on the market that makes what you have now only useful as a paperweight. That's the nature of the beast with technology.
When you need computer equipment that has a relatively short useful life, leasing is often a better option than buying. There are little or no upfront expenses and you can upgrade to better, modern equipment when the lease term ends.
Businesses can lease almost any type of IT equipment imaginable, from phone systems, to computer servers to copiers. You can also lease some of the "soft costs" associated with IT equipment purchases including training and installation.
Leasing computers or IT technologies such as tablets, computers, telecoms and servers allows businesses to improve on performance by getting the latest IT equipment without enough capital or an existing line of credit. It can also be said that computer leasing helps businesses obtain the latest IT solutions without compromising because of their cash flow.
Computer leasing also protects business owners against IT obsolescence which can happen any time and which is also a major issue for computing and IT equipment. With computer leasing, businesses can get all benefits realized from using the right technologies, while paying for the equipment over its working life.
In addition, leasing helps businesses speed up their return on investment and delivers increased cost savings and profitability.
Computer Equipment Leasing Average Costs #
Lease terms generally span anywhere from 12 to 60 months, depending on the type of IT equipment you need and how much it costs. Most lenders require monthly payments, although some will allow you to negotiate an alternate payment schedule.
A standard rate for leasing business equipment is $60 per month for every $1,000 purchased. At this rate, a $5,000 piece of IT equipment will cost you $300 per month while a $100,000 piece of equipment will run $6,000 per month. You can opt for lower monthly payments by negotiating a longer lease term or you can choose higher monthly payments and a shorter lease term.
IT equipment financing rates vary based upon several factors: the size of the lease, your credit score and payment history, and where your business is located.
- Equipment priced less than $100,000 usually comes with a higher finance rate - anywhere from 8% to 20%.
- Larger, more expensive equipment can generally be leased with a financing rate of 6% to 8%.
Many IT equipment financiers offer payment calculators online to help you estimate the total cost of an equipment lease. However, keep in mind that the figure is just a guideline. The actual monthly rate can be much higher or lower depending on your credit score and history.
IT Equipment Leasing Finance Options #
There are two basic types of equipment leases:
- Finance leases offer you the option to buy the equipment at the end of the lease. These leases usually span the expected life of the equipment.
- True leases are less expensive and span less than the expected life of the equipment. At the end of the lease, you can choose to return the equipment or negotiate a purchase price.
Both types of leases are generally easier to obtain than a bank loan. They're more expensive in the long run but an ideal option for businesses with less than perfect credit. Another benefit to leasing is that the payments are tax deductible as a business expense, reducing the total cost of the equipment.
When it comes to IT equipment, leasing is growing in popularity primarily because of the speed of technological advancements. Computer and IT equipment can be obsolete within a matter of years, perhaps even before you've finished paying off a bank loan. When you lease IT equipment, the lender - not your business - takes on that risk.
Keep in mind, however, that the overall cost of leasing computer equipment can be greater than buying the equipment outright. According to Forbes.com, a three-year lease on a computer that costs $4,000 to buy could be as high as $5,000 to $6,000. Granted, that comes with unlimited support, insurance, and guarantees that you don't receive with an outright purchase.
Points to Consider Before Opting for Computer Leasing #
- Terms of the lease - if you want to opt for computer leasing, it is critical to do your homework in order to get favorable lease terms. In this case, consider the type of lease you will be required to sign (operating lease or capital lease) and identify features of each type of lease.
- Buyout option - before signing a computer lease agreement, find out where there is a buyout option. In most cases, leases have what is known as a fair market value (FMV) or a one dollar buyout option. Understand what buyout option you have and whether it is favorable for both parties.
- Lease duration - it is important to understand how long the lease will last before signing the lease agreement. Leases for most IT or computer equipment have a maximum duration of 48 months. Understand that the longer the lease period, the lower the monthly payments.
Benefits of Computer Leasing #
Leasing computers or IT technologies such as tablets, computers, telecoms and servers allows businesses to improve on performance by getting the latest IT equipment without enough capital or an existing line of credit. It can also be said that computer leasing helps businesses obtain the latest IT solutions without compromising because of their cash flow. Computer leasing also protects business owners against IT obsolescence which can happen any time and which is also a major issue for computing and IT equipment. With computer leasing, businesses can get all benefits realized from using the right technologies, while paying for the equipment over its working life. In addition, leasing helps, businesses speed up their return on investment and delivers increased cost savings and profitability.
Watch: Benefits of Leasing Equipment | Computer Leasing | Laptop Leasing #
Review this video to find out if equipment leasing is right for your business.