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Asked 8/14/2010

What is a lease? Why would you choose to lease instead of buy a capital item? What steps would you follow to decide whether

What is a lease? Why would you choose to lease instead of buy a capital item? What steps would you follow to decide whether to lease or buy a computer system?

 
 
 
 
 
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Answer 1/3 - Submitted 8/15/2010

A lease, as you are using it, is little more than a financing plan, at the end of which you don't own the equipment.
At one time, there was a considerable tax break when you leased equipment for your business instead of purchasing it. That reason may still be valid in some places and to some degree, but I would ask a tax professional.
Sometimes a lease is offered with a lower down payment than that of a conventional loan to make the same purchase.
Many people are under the mistaken impression that since they are leasing their computer, and don't own it, that the leasing company will pay for repairs and maintenance. This is a myth. It's nothing more than a finance plan, and even if you turn it back in at the end of the lease, it can be costly.

 
 

Answer 2/3 - Submitted 8/15/2010

In my opinion you should never lease depreciating items. Computers would be in that group. So would cars. The exception is paying rent on an apartment, for example, if you cannot afford to buy a house. Leasing is a good idea for businesses, but are a bad idea for individuals, from a financial perspective.

 
 

Answer 3/3 - Submitted 8/15/2010

It may be cheaper to lease than to buy. It depends on the terms.

 
 
 
 
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