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[ The PC Guide | The PC Buyer's Guide | Purchasing PCs and Components | Payment Methods | Delayed Payment Options ]

Financing and Leasing

Financing a PC simply refers to borrowing money to pay for it, much as is commonly done for an automobile or a house. (Of course PCs are much smaller-value items so financing isn't done nearly as commonly for them as it is for cars or homes, but a high-end PC can still cost several thousand dollars.) Leasing is similar to financing but instead of borrowing money to buy a PC for yourself, the leasing company buys it and lets you essentially rent it from them for a period of time, usually one to three years.

Financing and leasing are different because in each case a different party retains ownership rights. There can also be tax and accounting implications, because leasing may be considered an operating expense while financing may be counted as a capital expenditure for some businesses. In the end, however, they both boil down to the same thing: you get the PC and have to send someone else a monthly payment for it.

Note: On items like cars leasing can result in lower payments than financing, because you are theoretically paying for only the difference between the price of the car and its residual value at the end of the lease. PCs however usually have a residual value close to zero at the end of a lease due to their rapid depreciation, so this advantage is mostly negated.

Financing and leasing can be done in one of two ways. First, some vendors or manufacturers will offer it themselves to their customers; this is most commonly offered by direct-market mail order companies. Second, you can finance or lease through a third party, a bank that specializes in this sort of transaction.

While financing or leasing make sense in some situations, especially for businesses, bear in mind that you are still borrowing money and paying interest for the equipment. Unless there are specific advantages to doing this, you are going to save money by just buying the machine outright.

If you do opt to go with financing or leasing, you need to negotiate a reasonable interest rate and payment terms with the company before you sign the contract. Be careful to watch out for bait and switch on financing rates; some companies advertise that they offer a low rate to "qualified buyers", but then make qualifying nearly impossible so they can charge a higher rate. The interest rate should be considered just another factor by which to judge whether or not you want to buy from a particular source. If you plan to finance or lease, don't negotiate the deal and the finance rate separately.

Warning: Resist the temptation to finance a PC over a very long period of time. At first, it seems like a good way to lower your monthly payments, but you are committing yourself to higher overall interest expenditures on an item that is rapidly losing value. If you finance a system for three or four (or five!) years, you may find the last year of that contract very painful to pay off. By then, you'll probably be ready to move on to your next machine, and it will really stink to still be paying a monthly charge on an old system you've relegated to occasional use (or worse, your closet).

Warning: Read the fine print carefully; look for hidden gotchas like charges that come due at the end of the lease.

Incidentally, there are companies that rent PC equipment as well. While leasing and renting are similar concepts, renting a PC is very different from leasing one. Due to the rapid devaluation of PC technology, renting a PC is very expensive. How expensive? Well, it can cost so much per week to rent a PC that after 10 or 15 weeks you'd have paid out the equivalent of what it would cost to buy the machine! You also don't have that many choices about what you get when you rent. Needless to say, I don't recommend renting PCs for any but the most specialized of situations.

Next: Comparison of Payment Methods

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