With little, or nothing to pay upfront, leasing is a very cost-effective way to buy new IT equipment and telephone systems.

What is leasing and how does it work for a business?

Typically a lease is a method to pay for equipment over a fixed period, with little or nothing to pay upfront. For IT equipment, such as computers or servers, you would spread the cost over 36 months. Phone systems can usually be paid for over 60 months. Depending on the interest rate you may be paying a bit extra for the spread payments.

Depending on your lease agreement, at the end of the payment term (eg after 36 months) you can usually:

• carry on paying as normal;
• pay a small fee to buy the equipment outright;
• stop paying and hand the equipment back.

What are the benefits of leasing computers and phones?

The main benefits for a business are twofold.

Firstly, a lease helps your cashflow as the payments happen over a longer period. This is really helpful if you need the equipment to generate the cash to pay for itself.

Secondly, there is a potential tax benefit as spread payments can qualify for immediate tax relief (operating expense).  Usually buying an office item, such as a computer or phone system, counts as capital expense and is depreciated over a long period. This means that the tax benefit for a capital expense is realised over several years even though you have paid for it immediately. 

What happens if I move or wish to upgrade my telephone system?

You should check your terms and conditions, but moving premises does not normally effect your lease. You are duty bound to tell the finance company where the computer or telephone equipment is moving to though.

Upgrades are trickier. A wholesale upgrade usually can be taken care of by creating a new lease. Smaller upgrades may be better done as a cash purchase or a separate lease.

DISCLAIMER: This page is a general guide to leasing. You should always check and understand the terms and conditions of any financial agreement you enter into.