Decisions, Decisions

Buying vs. leasing: Which is the better deal?
4 min read

This story appears in the June 2000 issue of Subscribe »

Establishing the best home office set-up is a lot like buying a minivan or having your house painted-you don't want to sacrifice practicality for style (although a little cachet never hurts) and you want a good return on your investment.

So sooner or later, homebased entrepreneurs just starting out or thinking about refurbishing their operations will consider buying equipment vs. leasing it as a means of getting the most out of their investment. That's only natural. Most home office professionals have spent time in large corporations, where the benefits of leasing were fairly obvious-great tax breaks, the ability to change equipment to keep up with the times, and low or no maintenance costs on leased equipment.

But does leasing hold the same appeal for homebased businesses? Unless you're strapped for cash, no. Here's why.

Brian O'Connell is a Framingham, Massachusetts-based freelance business writer. His most recent book, (Bob Adams Media), is available this September. His earlier books, Generation E: How Young Entrepreneurs are Changing the Corporate Landscape (Entrepreneur Press) and The 401(k) Millionaire (Random House/Villard), are available in bookstores. A frequent contributor to many national business magazines, he can be reached at

Leasing Vs. An Installment Plan

Consider a need for a new personal computer. While leasing will get you that new Gateway or Dell PC without a lot of upfront money, it may cost you more in the end. That's because PC manufacturers have rigged their leasing services so that you wind up paying-and in some cases overpaying-for a PC that you might use for only two or three years, depending on the leasing agreement.

Companies like Dell, Micron and Gateway offer better deals in the form of low monthly installment payments if you can't afford to part with $1,500 or so upfront for a new computer. Plus, even paying a monthly fee doesn't disqualify you from trading in your old PC for a new one under the installment plans.

Where leasing does work is when you're not sure what kind of equipment you'll need as your business grows. Leasing a computer for a year or so may be a good idea if there's a chance your desktop publishing business will develop into a graphic design firm in a year or two.

If you do want to lease, perhaps Dell Computers represents one of your best PC options. The company doesn't ask for a penny upfront-a big advantage for cash-strapped homebased business owners-and at $103 per month for a two-year lease and $59 per month for a three-year lease (for a $1,700 PC), there's no budget-busting costs involved. On the down side, you can't resell your leased computer as you could one you owned--but with today's technology advancements, the market for three-year-old PC's isn't very hot.

Renting Software

An instance where leasing-or better yet, renting-home office equipment is a better bet can be found in an unlikely place: the software world.

Say you want to write a business plan but don't have a clue as to how to bang one out. Instead of visiting your local computer store and buying a business plan software package for $60 or $70 from a vendor like Smart Online, you can "rent" the same package for an unlimited time from Smart Online's Web site for only $25.

Or how about tax time, when stress is high and price tags for tax planning and filing software can cause your stress level to rise even higher? Instead of paying $30 for a program like Quicken's TurboTax or Kiplinger's TaxCut, try buying the online versions for $10 each, including free e-filing services. Check out the companies' Web sites for more details.

Help With Purchasing

Overall, it's usually a good idea to pay upfront and purchase home office equipment outright. Like the commercial says, ownership does have its privileges, primarily in long-term costs savings, easy trade-in values, and the option of keeping your PC, printer or fax machine for as long as you want.

For tips and help on getting the most from your budget, check out these Web sites before you cut a check for a new piece of office equipment: Checkbook (advice and target prices for all kinds of business and electronic products) and On Sale (an online auction site for office equipment).

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