The Pros and Cons of Buying vs. Leasing Office Equipment
Join us in a city near you at Entrepreneur’s Accelerate Your Business event series kicking off Feb 23. View cities and dates »
The tax deduction was a key reason business consultant Marie Forleo decided to buy her computers and video equipment. Forleo runs MarieTV, an online television show that mixes tips on small-business operations and marketing with a healthy dose of inspiration. Launched in 2010, the show serves as a promotional vehicle for Forleo's New York City-based coaching and consulting business. "I knew I'd be using that equipment nonstop, and that it was a great tax write-off," she says. "Generally speaking, I like to own things I'm using all the time."
Like Forleo, Steve Sims bought all his equipment when he launched Bluefish, a luxury concierge and travel service based in Los Angeles. But for his new company, Taste of Blue, an online click-to-purchase site for luxury experiences, Sims chose to outfit nine staffers with leased computers, printers and a copier. "Most of your assets depreciate the second you buy them," he says of the money he believes he wasted when he opened Bluefish. "Now if we can lease it, we do." The upfront cash saved from leasing allowed him to invest more in the company and staff.
Shawn Royster learned the hard way that leasing works best for Royster Productions, his Los Angeles- and Las Vegas-based film and TV production company. Typical jobs require "everything from cameras to A/V gear, projectors, sound equipment and lighting," he says. "And when we do live events--seminars, conferences and so on--we need computer equipment as well."
Originally Royster purchased his equipment, believing that ownership would increase his profit margins. But by the time the gear had paid for itself and the business was turning a profit, his gear was out of date and needed to be replaced. At that point Royster sold everything and turned to leasing.
"My world is all about the latest technology," he says. "As soon as you buy something, it's outdated." With leasing, however, Royster has access to the best new equipment available.
The decision to buy or to lease computers and other equipment necessary to do the job often comes down to the cost of total control vs. flexibility.
Both options have their advantages. Buying is straightforward: Just figure out what you need and look for the best price (or combination of price, warranty, service, etc.). You can deduct the entire cost of the equipment from your taxes in the first year, or you can choose to spread it out over several years.
Renting or leasing doesn't provide as big of a deduction. But there's a substantially smaller upfront cost, which frees up money to be invested elsewhere, while the cost of upgrading down the road is minimized.