Should you lease computers?

By Steve Strauss

Should you lease computers?

Q: We need to upgrade our computer system but it really seems cost prohibitive. Do you think leasing might be a good way to go? What other options are there?

Bill

A: Considering how vital computer hardware and software is to almost every business today, it is surprising how haphazard many of our systems are.

Case in point: I recently bought a new laptop but unfortunately didn't like it at all. I finally decided to sell it on Craigslist. The guy who bought it told me that he had to have it because his entire office (save for him and two other people) ran Vista. His boss told him he had to get a newer computer that ran Vista, period.

Isn't that fairly typical?

Far too many small businesses have a hodgepodge computer system that consists of some old, some new, some tried, and some blue. Yet the cost to upgrade and make thing both uniform and up-to-date seems too high, so we soldier on.

To figure out what options are available to remedy this unfortunate situation, I decided to speak with, not just an expert, but one of the top experts, Dell's Chief Information Officer, Steve Schuckenbrock.

Schuckenbrock said that a mistake small business owners tend to make when it comes to computers is that they look at the short-run costs of purchasing versus the long-term cost of ownership. He suggested that if you were to look at the bigger picture, the desire to simply save a couple of bucks today would likely be supplanted by the overall benefits of getting the right system.

Schuckenbrock explained that a great way to get what you want at a price you can afford is to lease your system. Leasing offers several important advantages.

First, there is a lower initial outlay of capital. Consider: It may cost you $10,000 to purchase a top-notch, up-to-date system with all of your favorite best bells and whistles. But leasing that same system would likely be only a few hundred dollars a month. Considering that you will never really have any worthwhile equity in your computer system anyway, leasing may indeed be an attractive financial option.

Another clear advantage of leasing your computer equipment is that you avoid having obsolete equipment. Just as with the fellow who bought my computer, it makes no sense to run a business with computers that are out of date or can only run old programs. Software is becoming ever more powerful and it is the savvy businessperson who figures out, not only how to take advantage of that, but how to do so consistently. A leased computer system allows for that.

But wait, there's more!

According to Schuckenbrock, another significant advantage of leasing your computer system is that you can finance more than just the hardware; you can also add software and services as part of the overall package. Leasing means that you can have a new system, integrated, up-to-date, and with the software and support you need for a price far less than it would cost to outright purchase the same thing.

There are a few other advantages to leasing of which you should be aware:

It's flexible: Typical computer leases run anywhere from two to four years. When the term is up, you can simply return the equipment, or buy it, or upgrade to a new system and a new term. Options galore!
It's safe: A computer lease also means that your equipment will always be under warranty, although of course this is something that you will be required to pay for. Nevertheless, having a service contract or some other type of other warranty protection sure comes in handy when you need it.

What about the disadvantages of leasing? There are a few.

First, it will probably be true that the overall cost to lease the equipment, with a service contract, updates, etc., will be more than if you simply bought the system outright. The difference of course is that you are spreading the cost out over the course of the lease instead of making a one time, lump sum payment.

The second downside is that you will be obligated for all payments under the lease, even if you end up not needing the equipment for whatever reason (you sell the business, or close the doors, or whatever.)

Finally, at the end of the term, you may be obligated to buy computers that have become obsolete.

But despite these minor detriments, I came away from my conversation with Dell's Chief Information Officer with a newfound appreciation for what I previously thought was not a good idea - the computer lease. It is indeed a good idea in the right circumstance.

Steve Strauss is one of the country's leading small-business experts, a columnist for USATODAY.com and the author of The Small Business Bible

If you would like to have Steve speak to your group, or to sign up for his free e-newsletter Small Business Success Secrets!, visit his Web site.

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