For years, popular “money experts” have preached that you should “never buy with credit what you can buy with cash”. And, while this is a nice sentiment, this ideal is very subjective.
When it comes to purchasing technology, this practice becomes a bit more difficult. Here’s a few reasons why financing technology is better than paying with cash:
- Technology depreciates rapidly. Spending capital on something that is going to be worth less with every day that passes means you are stuck with useless equipment the end of that technology’s lifetime.
- Soft costs can add up fast. When purchasing a comprehensive IT solution, soft costs like labor, installation, and maintenance are often not included in the sale price, which means you’re outlaying more cash initially than you would if you had decided to pay monthly for the same equipment.
- Upgrading equipment often can be expensive when paying with cash. When you outgrow your IT solution, the burden of finding a new solution falls on you – the owner – and the process begins all over again. When you finance technology solutions, you can easily upgrade your equipment, often times for the same monthly payment, and not have to worry about purchasing new equipment.
- It’s easier to budget when you have a monthly payment. Paying cash outright for an expensive IT solution can mean that your operating expenses for that month, or year, are totally used up. This leaves no room for emergency spending, and often times can eat away at reserve funds. When you make monthly payments, you can allocate the money you had previously budgeted into the operating expenses you are in most need of.
Yes, it is true, paying cash is a good business practice. But, in a rapidly evolving, technology driven, economy, being nimble and adaptable to the changing landscape is incredibly important. The ability to upgrade to new equipment quickly and easily, and budget properly are just a few reasons why financing technology projects make more sense than paying with cash.