When it comes to the best way to purchase office equipment and supplies, for small and medium-sized businesses, the first step should always be to contact a financial advisor to discuss the best way to go about purchasing. In this summary, however, I offer some tips for outlining possible routes to a profitable acquisition. Outright purchase or leasing are generally the usual options, with installment purchase schemes providing a third route to explore.

Purchasing an asset is almost always the most convenient acquisition method. However, in some cases, especially for the purchase of high-end multifunctional office equipment, the purchase may be seen as impossible due to a lack of funds in the current fiscal year or, in any case, a high cost that discourages those all-important upgrades towards a more efficient and productive business.

However, many companies have found that leasing becomes a favorable option, if necessary by financing an agreed budget deficit against underspending in future years. There are now several options where leasing can provide the best overall value for money.

To expand on this, here are a few different ways to get higher cost gear. This is just a brief summary, designed to help in discussions with vendors or internal finance departments.

Office equipment leasing vs. Hiring or Rental The Equipment Leasing Association defines a lease as “An agreement between lessor and lessee for the rental of a specific asset selected from a manufacturer or seller of such assets by the lessee.” In this scenario, the property stays with the landlord. The lessee has possession and use of the property for a period upon payment of the specified rents.

This system is different from that of contracting (including rent and contract rent). Contracting requires the user to select from specialized stock already held by the contracting organization, which typically charges a flat fee. Leasing allows the user to select goods from a manufacturer or other supplier of the required goods.

A lease is usually negotiated on specific terms of the deal, with the landlord. The lessor acquires the goods chosen by the lessee. Exceptionally, this may allow the lessee to use the assets by making payments out of income. Office equipment (including photocopiers and fax machines) and furniture, automobiles and commercial vehicles, computers, machine tools, laboratory equipment, and contractor plant are all candidates for lease.

Some advantages of leasing:

– All costs are fixed in advance, so the budget is exact – The goods cannot be withdrawn once the contract is signed (as long as the agreed conditions are met). – Eliminates the need to tie up capital. required – the lease is simply on the cost of rent. – Leasing frees up capital that may not be available elsewhere. – The lease is inflation proof since payments are made with future funds, in fixed monetary terms. Therefore, real costs fall in the face of any inflation. – possibility of immediate use of cost-saving equipment.

Some disadvantages of the lease:

– In general, it is not possible to dispose of the goods before the end of the lease. – The asset is not owned. – Funds must be allocated to pay the lease throughout its term.

Financial and Operating Leases Broadly speaking, two types of lease arrangements can be considered. On the one hand, financial leases can be of good quality, when an organization’s purchasing power does not allow it to negotiate the best single price against the latest releases of office equipment. On the other hand, operating leases may provide the best value when the risks associated with technological change and service costs are taken into account.

(A) Financial Leases In this case, the lessor arranging the terms of the lease has no interest in the transaction other than the provision of financing. What happens is that the lessor pays for the goods and becomes the owner. The money paid by the lessee covers the capital cost of the property, a service charge to cover the lessor’s overhead in setting up the lease, interest charges and some profit to the lessor. The object of this type of lease is solely to provide financing to the lessee, against the security of the goods themselves. The renter is responsible for maintenance and insurance.

(B) Operating leases

This type of leasing is primarily done by manufacturers or vendors to help sell products that tend to be specialized or highly technical. In this scenario, the assets are always fully depreciated over the lease term. In addition, the lessor is responsible for servicing, maintaining, and upgrading the equipment. This type of lease allows the lessee to avoid some of the risks of ownership, such as obsolescence. One classic area where this type of leasing is extremely useful is in the supply of networked multifunctional office equipment or copiers. Such equipment may be obtained on an operating lease under the terms of an official contract that calculates payments in terms of price per copy.

Footnote: Purchase in installments

Also sometimes called a Lease with Purchase, the operation of such a contract is very similar to a lease. Payments are made at an agreed rate and for an agreed duration, but the important difference is that ownership of the asset passes to the customer. The higher the risk for the company offering the rent-to-own plan, the higher the costs.