A lot of businesses tend to take out significant loans for highly depreciating assets that do them little or no financial good in the long run. Many of these assets are for high cost items and are even more expensive when the interest rates are added on. Of course, there are some items in business that it makes more sense to buy than rent – however, here are some we don’t think provide good worth for money.
The life of an average computer is around three years or so and many businesses require the more expensive models for use. Purchasing a top of the range Mac or PC that you hope is to some degree future proofed is an expensive ordeal, especially as it is a throw away item after only 36 or so months due to depreciation. Unlike many other items the computer is often of no use after this period and so provides little or no further purpose.
Of course, added issues come about with the reliability of computers, which can often be a little lacklustre. The solution is to avoid buying a computer and simply to lease one over a set period. For business this means, there is no initial cost, no worry about deprecation and no chance of item being out of date within a short period of time. There are also no interest based repayments, something many will also appreciate.
Though many businesses continue to do it buying a car is a costly and also in the long term an expensive affair. Unlike appreciating assets the car can depreciate significantly over the first three or so years – many are worth only 40% of their original value after only this short period of time. Of course, add to this the interest costs, lump sums and also the rouble should it break down after you decide to keep it after warranty and you realise the trouble.
Car leasing or car hire is seen by many businesses as a far more practical way of attaining a new vehicle, but without having to pay the high costs or suffer the depreciation and reliability issues.
This asset depends on machinery, it’s price and its lifespan. Highly depreciating machinery that is functional for short periods can be seen similar to that of computers and is a pointless asset. Of course, this depends on the industry.
Conversely, there are also assets that provide excellent long term value and are worth investing in and keeping as they last for long periods of time. For businesses this completely depends on the specific situation, though research should always be made before the purchasing or contractual hire of an asset of any sort.
Cormac Reynolds writes for UK contract hire site First Vehicle Leasing – who provide car leasing to a range of UK businesses.