Buying: The Benefits, it's easier than leasing. Buying equipment is easy-you decide what you need, then go out and buy it. Taking out a lease, however, involves at least some paperwork, as leasing companies often ask for detailed, updated financial information. And while that sounds like the best option, keep in mind that monthly payments on FMV leases are usually lower than 1 buyout leases. If you're fairly certain you'll want to upgrade to new technology when your lease expires, go with the FMV option. FMV means you can buy the equipment at the lease's end for its fair-market value, which could be hundreds of dollars. In contrast, a 1 buyout option means the equipment is yours for 1 when the lease expires.
The result: You're better able to keep up with your larger competitors without draining your financial resources. Leasing: The Downsides, you'll pay more in the long run. Ultimately, leasing is almost always more expensive than purchasing. Your equipment is deductible. Section 179 of the IRS code lets you deduct the full cost of newly purchased assets, such as computer equipment, in the first year. With most leases favored by small businesses-called operating leases-you can only deduct the monthly payment.
You pay nothing up front. Many small businesses struggle with cash flow and must keep their coffers as full as possible. Because leases rarely require a down payment, you can acquire new equipment without tapping much-needed funds.