5 reasons why you should be leasing your business technology
by Rasheeda Russell on Jun 07, 2022
In this blog we will give you the 5 reasons why leasing is the best way to buy your business IT hardware, such as Macbooks, Laptops and smartphones. No more painful purchases of hundereds, or even thousands of pounds, everytime you hire a new employee.
Firstly we need to explain what a lease is and it works for your business
The type of lease that is best for your business is an Operating Lease.
In an operating lease you make an arrangement with a leasing company to use the equipment over a period of time (the length of you lease contract). You pay a monthly or quarterly payment and get to use the equipment for the period of the lease. At the end of the lease you give back the equipment.
Because you are giving the piece of equipment back at the end of the lease this makes it cheaper for you. The Leasing company will estimate an end of life or “residual value” to this piece of equipment. This will reduce the total value of the lease. This will then lower the cost of the monthly payments. Wikipedia helps explain this too!
Firstly a note of caution. The wrong lease can be bad! Some lease companies charge a very high rate of interest. This is because they are just lending your business money on an unsecured basis and using a lease is an easy way to lend to your business. I have had a bad experience in the past where I was charged a really high lease rate for a business from a bad lender. So always do your maths and make sure the deal is a good one.
So why is leasing better for your business?
1. Leasing can cost less
Leasing work well if you are looking for high quality equipment. Good equipment keeps a strong residual value. With people holding onto their devices for longer and the stregnth of the second hand market, this is all driving a stronger residual value. Lease companies are more confident of the end of lease value of brands such as Apple, Samsung, HP and Lenovo. The better made, the more its worth at the end.
Leasing company cars is common practise. It's the same principle. Once there is a good second hand market lease companies will give you a higher end value for the equipment. This also brings down the interest rate (and therefore your monthly or quarterly payments). This is because they are not just lending you money but they will also get an asset at the end of the lease that they can sell on, and potentially make some money.
2. By not buying the equipment upfront you can invest in your business
Buying equipment can be expensive! A good Macbook can set you back more than £2,000 and that is just for one employee! When you are launching a business these costs really add up.
But if you can lease the equipment it allows you to spend more on the important things such as hiring the right people and marketing. Technology should be an enabler not a cost centre.
As your business starts to generate revenue you can pay back the lease overtime. Allowing you to grow faster and become profitable sooner.
3. It’s tax efficient
Lease payments are treated as an expense for accounting purposes, this means that you can fully deduct them from your profits versus tech being a capital allowance which you will then need to depreciate over time.
This means that the cost of your lease is actually 19% (the rate of corporation tax) cheaper than you might think. Check out the details with your accountant but it's a lot simpler than buying equipment and worrying about capital allowances.
So you can always make sure that your employees have the best kit rather than paying this away in corporation tax!
4. You don’t leave money sitting in a drawer
We have talked about second life already.
So you might think: why don't I buy the equipment outright and then sell it myself when I am done. This sounds like a great in principle but in practise you may just leave money lying in a drawer! As any of us that have tried to sell a used car its a hassle and securing the best price can be challenging. People are moving away from buying off individuals to buying off companies where they have a guarantee if something goes wrong.
Also you simply cannot predict the price of the equipment in 2 years time. With more device choices due to come into the market over time, this will put pressure on device prices, so "locking" in a residual value into a lease is the safest/smartest way to do it.
Go on, open a desk drawer now! And I am sure that you will find a piece of old tech, gathering dust. An old phone or tablet with a broken screen maybe. And after a while you will be tempted to do a spring clean...
5. Most importantly it's the more sustainable option
We have left the best reason for last. Leasing promotes a circular economy for technology, with 40 million unused tech devices sitting in drawers today, and with electronic waste out of control, we all need to play our part to helping save the environment.
Electronic waste is the most toxic form of waste and the fastest growing waste category in the world, of which the UK is the worst country in europe at producing it.
Using an Operating Lease will ensure that your equipment gets a second life.
Leasing companies sell on your old equipment to make money. So they will either refurbish and resell or at worst use it for spare parts.
Have we convinced you of the merits of leasing your business equipment? We like to think of it as a smarter, cheaper and greener way of doing things.