Buy, rent, or lease: Which model best suits your next IT hardware refresh?

Many organisations plan for a four-year lifecycle on their IT hardware. In reality, devices can feel outdated much sooner. For laptops, the reality is even starker, with the ATO assigning them an effective life of just two years.

As refresh cycles compress, the way businesses look to acquire new technology matters. There's now a wide range of alternatives to buying IT hardware up front (although, sometimes it still makes sense to do so, more on that below), with many organisations looking into rental or leasing options. 

The right investment model depends not only on cost, but also on your business size, goals, and operational needs. This article breaks down all the available options for you to determine which model best fits your business. 

Key insights

• There are three main models for investing in an IT hardware refresh: buying the equipment outright, leasing it over a set timeframe (usually with the option to purchase the hardware at the end), or renting IT hardware on a month-by-month basis.

• Traditionally, an IT hardware purchase was considered a capital expenditure (CapEx), but rent and lease options mean businesses can now shift costs to more predictable operating expenditures (OpEx).

• There really is no one-size-fits-all approach when it comes to IT hardware expenditure; it comes down to the needs and requirements of each organisation.

Buying IT hardware outright

Buying IT hardware outright involves making a one-time, upfront cost for devices and equipment that’ll be used now and into the future. It’s considered a CapEx, meaning the hardware depreciates over time.

Given upfront costs can be substantial, teams may have to go through a rigorous process to get approvals made before any purchase. By buying outright, companies are then responsible for the maintenance, repairs, and end-of-life disposal of the equipment (we can also help with that).

Pros

• Full ownership

• Long-term cost savings potential

• No recurring payments 

• Greater control over assets

Cons

• High upfront costs
  

• Obsolescence risk 

• Limited flexibility and scalability 

• Capital tied up in depreciating assets

IT hardware leasing models

For businesses seeking predictability without the upfront investment, leasing offers a good middle ground. 

Leasing IT hardware involves signing a (usually) multi-year lease where you pay to use a set amount of equipment for a set timeframe. You’re often also given the option to purchase the equipment at the end of the lease term. 

This option gives companies the ability to spread out the cost of the hardware over a fixed term, with payments usually made every month or every quarter. Just be aware, services, including installation and maintenance of the equipment, aren't always automatically included in a lease agreement.

Pros

• Predictable, spread-out payment structure
  

• Option to own the equipment at the end of the period

• Lower upfront capital compared to buying outright

• If contract allows, can support mid-term refresh cycles
  

Cons

• May include contractual obligations or early termination penalties
  

• Flexibility to scale down is restricted

• Support may be limited unless purchased separately

IT hardware renting options

Renting IT hardware often involves monthly payments to a provider that delivers, installs, and maintains your equipment. Rental agreements often bundle services, from support and maintenance through to refresh cycles, into their offering.

Hardware-as-a-service (HaaS) is becoming an increasingly popular option, with the HaaS market growing at an estimated 25% compound annual growth rate (CAGR) globally.

HaaS is a service where hardware is rented from a managed service provider (MSP) on a subscription basis. This model often means you get access to a wider range of devices and solutions that may otherwise be too expensive to invest in. 

Often, an MSP will install and maintain the equipment, upgrade hardware when needed, and remove obsolete equipment from site. Businesses can also often access advanced security measures, with dedicated cybersecurity experts capable of taking responsibility for updates and installing the latest security measures onto systems. 

The flip side is IT teams can sometimes come to rely too heavily on MSPs. For instance, if something fails with the hardware and the IT team can’t fix it, there could be costly downtime while waiting for an MSP specialist to support.

Pros

• Lower upfront investment
  

• Improved cash flow

• Scalability and flexibility 

• Easier budgeting and forecasting
  

Cons

• Potentially higher long-term cost
  

• Dependency on an MSP

• Security or compliance issues can occur when working with a third party

An alternative approach

In practice, many organisations don’t rely on a single model at all. 

There’s also a hybrid approach, which is best suited for large organisations that have both long-term and temporary workloads. For instance, a Tier 1 retailer may buy core infrastructure outright (which could include monitors and desktop computers), lease laptops for limited-contract staff, and rent select devices (such as POS tablets) for seasonal peaks. 

Comparison of buying vs. renting vs. leasing IT infrastructure

How to choose the right IT hardware buying model for your business

With each model offering different trade-offs, the right choice for your organisation depends on more than just cost. Here are some questions to consider:

• What’s your business size, and is there a growth plan?
  

• What are the budget constraints that exist within your company?

• What IT capabilities already exist in-house?

• Does your business require strict compliance and security considerations?

• Do you need more flexibility or more long-term stability?

If you need help talking through the models mentioned above or would like to explore next steps, get in touch with our team of experts today. We’re here and ready to help you find the best solution for your business.