As a technology trainer, I am asked this question time and time again: should I buy or lease my next computer?

It's a common question since many business people have been led to believe that there are some sort of "magical properties" to leasing that would make buying a computer more affordable or more advantageous for tax purposes.

In reality, leasing a computer is typically the most expensive purchasing option! And, often a very confusing transaction, too.

The Variables

While some leases are fairly straightforward, you would do well to read the fine print, carefully. In order to make the monthly payments seem more affordable, many leases have significant down-payments, and/or back-end fees - money you owe at the end of the lease, even if you surrender the computer at the end of the contract.

Even the simplest leases are slightly confusing, in that they will seldom mention the effective interest rate on the contract. Since leases aren't actually "loans" you will often be told that there is no interest charged. While technically true, there certainly is a cost of this financing, regardless of what label is used to describe that cost.

For comparison purposes, a quick visit to the web site of one of the leading computer brands will allow you to calculate a typical lease payment. Entering a lease amount of $3,000 for 36 months simply tells you that your payment would be about $112 each month.

Not bad, you say? A few keystrokes on a financial calculator quickly reveals that the cost of this financing is equivalent to paying an interest rate of 20.33% - not such a good deal after all! And, at the end of the lease, you don't even own the computer!

Tax Implications

What about the vague promise of possibly receiving "tax advantages" if you lease? If you're a business customer, with substantial capitol purchases each year, then a lease may affect your taxation. However, since the IRS allows us to "expense" (write off, without having to depreciate the equipment) up to $19,000 for 1999 (more in the following years) then there really is no tax benefit for the average computer buyer.

No Free Lunch

A business purchaser, particularly one who spends more than $19,000 each year on capitol purchases, might very well wish to consult their accountant about the tax implications of leasing versus buying.

For the average purchaser, leasing computer equipment is a very expensive way to finance, and with no real benefits. Most would be better off simply paying cash for a computer, or financing on a lower-interest rate credit card, and then selling the equipment, or donating to a charity, when it's outlived its useful life.

With many fine machines available for near or under $1,000 and often at zero financing for six months or a year, and the fact that most 1999 models come equipped with Y2K compatibility, there is little reason not to buy to own.

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