New lease on life: Should I buy or lease my computer?
As we edge closer to the end of the financial year, many of us start thinking about upgrading our computer or laptop. But what to buy? And what can you afford?
With the constant advances in technology, it can be hard to keep up with the latest models and updates. This is where leasing comes into play.
Buying a new computer or laptop can be expensive, especially when you need one for work or personal use. Many companies offer computer and laptop leasing options for those who cannot afford to buy them outright. The idea of leasing a computer instead of buying it outright is becoming increasingly appealing. But is it worth it?
What is a lease?
A lease is a legal contract that allows you to rent an item, such as a computer, for a set period of time. The lease usually lasts between one and four years, during which you make regular rental payments (weekly, fortnightly, or monthly). At the end of the lease, you have the option to buy the item outright by paying a predetermined payout figure or return it to the leasing company.
What are the popular items people lease?
Leasing is a popular option for many big-ticket items. Household goods such as furniture, electrical appliances, and even cars are often leased. Computer and laptop leasing is a popular option for those who need access to the latest technology but cannot afford to buy it outright. This is because technology advances quickly, and it can be challenging to keep up with the latest models.
How is leasing different from buying outright?
When you buy a laptop or computer, you own it outright. You can do whatever you want with it, and you're free to upgrade or replace it whenever you like.
When you lease a laptop or computer, on the other hand, you don't own the device. You're essentially renting it for a set period of time, typically one to three years. When the lease is up, you have the option to buy the device or return it to the leasing company.
One reason people choose to lease their computers is that it provides a way to stay up-to-date with the latest technology without incurring the full cost of buying a new device. This is especially appealing to those who need to use high-end hardware for work or personal projects. Leasing allows you to access the latest technology without having to shell out a large amount of money upfront.
What about Buy Now, Pay Later (BNPL) versus leasing?
Buy Now, Pay Later (BNPL) and leasing are two options available if you cannot afford the full price of a laptop upfront. While both options allow you to spread the cost over time, they differ in several ways.
BNPL typically involves making four interest-free payments over six weeks. The benefit of BNPL is that you won't pay interest on the purchase. However, if you miss a payment, you could be subject to late fees and potentially damage your credit score.
On the other hand, leasing involves paying for the use of the laptop over a more extended period, usually 12, 24, or 36 months. BNPL is a good option if you only need a short-term solution to cash flow issues and can pay off the laptop quickly. However, if you need the laptop for an extended period and don’t have the cash to buy it outright, leasing may be a better option.
What is the difference between leasing and rent-to-buy?
Rent-to-buy is an option that allows you to rent an item with the option to buy it at the end of the rental period. Typically the provider won’t do a credit check, which is appealing to those with a lower credit rating. The rental payments are typically higher than the cost of leasing, but the upside is that you own the device at the end of the rental period. In other words, you're paying for the device in installments with the option to own it outright after a set period of time. As a warning, rent-to-buy can be an expensive way to buy goods.
As an example, you may rent a TV for $16 per week over a three year period. This means you will end up paying $2500 for an item that might cost you $700 to buy upfront. So look closely at the rent-to-buy deal, specifically at hidden fees, charges and conditions in the fine print.
What are the tax benefits of leasing?
The cost of a lease can be claimed as a tax deduction in some circumstances. If you use the leased computer or laptop for work purposes, you may be able to claim a portion of the lease payment as a tax deduction.
One of the biggest advantages of leasing is that it allows you to pay with pre-tax dollars. This means that a portion of the lease payments come out of your income before it gets taxed, resulting in a lower overall tax bill. Check with a tax professional to see if you can claim the cost of a lease on your tax return.
What are the major leasing companies in Australia?
There are several leasing companies operating in Australia, including RentSmarte, Rent4keeps, Difrent, and Mr Rental. It is important to do your research and compare different leasing options to find the one that best suits your needs.
What happens at the end of a lease?
At the end of a lease, you have the option to return the computer, renew the lease, or pay the payout figure to buy the computer outright. The payout figure will depend on the terms of your lease agreement. If you decide to return the computer, it needs to be in good condition and meet the leasing company's requirements.
What happens if you lease through work and leave that job?
If you lease a computer through your work and leave the job before the leasing period expires, terms of the lease agreement will dictate what will happen. In most cases, the lease will be transferred to you, and you'll be responsible for making the payments. This may mean you lose the pre-tax benefits of leasing through work. You may also be required to return the computer and pay any difference. If you're unsure about the terms of your lease, it's essential to speak with your employer or the leasing company to determine what your options are.
What happens if you break a lease?
If you break a lease early in Australia, and follow all the requirements in your lease, it should not affect your credit score - only your bank balance. The terms and conditions of your lease will outline how you can break a lease early without any legal or credit score ramifications. Typically, this involves providing adequate notice, paying one or two months of lease payments to the lender, and even paying termination fees. The only way that your credit score could be impacted is if you do not follow the requirements of your lease.
What happens if I miss a lease payment?
When you miss a payment on a laptop lease, there can be consequences. Most lease agreements will specify the penalty fees for late or missed payments, which can vary depending on the rental company. These fees may be a flat rate, a percentage of the total value of the laptop, or a combination of both.
If you continue to miss payments, the rental company may take legal action against you. This could lead to additional fees, a negative impact on your credit score, and even repossession of the laptop or computer. It is essential to communicate with the rental company as soon as possible if you are having trouble making payments.
Pros and cons of leasing and buying
Leasing a laptop or computer can be an attractive option for those who cannot afford to buy one outright. However, it is essential to weigh up the pros and cons of leasing versus buying.
Pros of leasing
- Lower upfront costs
- Option to upgrade to newer technology at the end of the lease
- Tax benefits for businesses
- Flexible payment plans
Cons of leasing
- Can be more expensive than buying
- Fees and charges may apply
- You don't own the laptop unless you buy it at the end of the lease
- No cooling-off period
- You may have to buy insurance
What are my consumer rights when I have a leased item?
When you lease a laptop, you still have consumer rights under Australian Consumer Law. These rights include automatic consumer guarantees, which cover issues such as product quality, safety, and fitness for purpose. If you have a problem with the leased laptop, you should contact the rental company as soon as possible to discuss your options.
The rental company may arrange for the laptop to be repaired or replaced, or they may offer a refund if the problem is significant. If the rental company refuses to help or you cannot resolve the issue, you can contact your state or territory's consumer protection agency for assistance.
What happens when a leased computer is under recall?
If a leased laptop or computer is under recall, the rental company should contact you to arrange for the device to be repaired or replaced. It is essential to act quickly to ensure the safety of yourself and others. If you have not heard from the rental company and believe your laptop is affected by a recall, you should contact them immediately to discuss your options.
Leasing is clearly not for everyone and can mean paying a lot more for a laptop or computer. If you’ve weighed up the pros and cons, however, and decide leasing suits your circumstances, you know what is involved. As always, if you have problems with a lease, please don’t hesitate to get in touch and let us help you handle it.