Many people when they are thinking of upgrading their computer system decide to lease it interestingly even if they have the funds. Some reasons I hear is why spend big money, we are thinking of selling so let someone else pay it, and we want cash flow. The other advantage is that doing leasing smooths out your cash flow, and it allows you to keep your balance sheet free of depreciating assets.
Having said that there are two principal methods outside of overdraft that people use to finance computers systems are rental and chattel mortgage.
On say a loan of $6,000 over five years for rental the cost per month is currently $118.05 EXT GST. You would need to add another $11.81 to that for GST, but it could be argued that a business does not pay the GST as it comes straight back. Since its a rental, it's all tax deductible.
On a chattel mortgage, over the same five years with a 20% balloon, the monthly repayments are $113.16, which are GST free. Which is slightly less! The other advantage is that the GST is rebated immediately so that on $6,000 you get $545.45 back up front which is almost five payments, so you get five months free. You would also be able to claim depreciation on the computers, as well as the interest component of the payments which would probably be higher than your payments. After five years, however, you would have an amount owing of $1,200.
Which one is better would depend on your circumstances?
Of course, I am not an accountant and always consult an accountant.
