Should you buy or lease your next batch of business smartphones? Here’s how leasing, the new kid on the mobile block, stacks up against buying your handsets the traditional way.
If you’re looking to upgrade your mobile handsets this year, chances are you’re also looking to save money. For some time now, the options have been pretty standard: buy your phones at an eye-watering retail price, or sign up to a multi-year plan and pay for both the handsets and the service at the same time. That way, you get the handsets at a subsidised price. Well sort of … because you typically wind up paying more each month for the bundled service than you would on an airtime-only package.
Luckily for cost-savvy businesses, there is a third way. By unbundling your airtime and handset packages, you can choose to lease your mobile handsets instead of buying them. And the right leasing package can knock £££ off the overall cost.
Leasing handsets? How does that work?
Leasing is exactly what it sounds like – you lease the handsets via third-party finance and pay for them in fixed monthly amounts over the term of the contract. When the contract’s up, you turn in your phones and upgrade to new devices.
Or, you have the option to purchase and own your phones indefinitely.
The beauty of handset leasing is it puts you in complete control of your mobile spend. Unbundling your package means you can pick the perfect SIM-only plan and then pair it with the handset lease that best matches your monthly budget.
What are the advantages?
Around 80% of the FTSE 500 are loving the equipment leasing option because of the clear benefits.
Afford the best
Flagship smartphones are premium items – some cost more than desktop computers. A lot of businesses would struggle to meet the costs of paying for an entire company’s worth of devices in one go. With leasing, you get all the high-end phones you want today, without having to fund it upfront. You can save your hard-earned money and put it to much better use in the business.
Leasing plans are designed to be business-friendly. They come with flexible lengths, typically 12-84 months, and most let you chop and change devices whenever you want instead of waiting to the end of the contract. So you can upgrade or add devices whenever you need to. End-of-lease options are pretty flexible too – most businesses choose to trade in their devices for an upgrade but you can own the handsets outright if you prefer.
Helps your cash flow
Handset leasing works like any other finance – you’re essentially spreading the cost over a term that suits you. Obviously, there will be a rate of interest, but nothing near what you might expect. Repayments are fixed for the length of the contract, so you always know what your monthly expenses are. Your FD will love this!
Looks good on the tax return
Lease payments are an operating expense so they are 100% tax deductible – you get to keep the cash in the business coffers instead of handing it over to HMRC. What’s more, you’re only paying VAT on the smaller monthly payments and not a large upfront cost at the start. It’s a great way to let your mobiles start earning their keep before you start paying for them.
Yes, but is it cheaper?
Leasing can definitely be cheaper than buying your handsets or signing an all-inclusive contract with a mobile phone provider. The biggest advantage is you’re in a better position to shop for a much more cost-effective airtime plan that suits your calls, text and data usage.
Leasing might even be a whole lot cheaper once you take the tax savings into account.
Suppose, for instance, that Acme Limited is looking to acquire some new handsets. Here’s what they’ve been quoted:
- Equipment price: £8,000
- Lease Period: 3 Years
- Frequency: Monthly
- Corporation tax rate: 19%
With a cash purchase, Acme will get just over £680 in tax relief through capital allowances, at the current writing-down rate of 18%.
With a rental, all the payments are tax deductible at the current rate of 19%.
By choosing to lease, Acme has chopped over £1,130 off its tax bill compared with a cash purchase – a massive saving.
The bottom line
We like mobile handset leasing because it’s so flexible – everyone from a small one-man business to a large enterprise can benefit. In fact, we’re starting to see leasing overtaking the traditional bundles contract, because there’s more opportunity to find the best airtime contract that suits the business.
As to how you arrange a leasing plan, the easiest way is to come to us. Each leasing program has its own nuances which means it can be time-consuming to wade through all the options. For instance, some plans will allow you to upgrade your handsets several times a year and some won’t. There are different lease terms and interest rates.
With TFM, just tell us what you need and we’ll do the rest. Once we’ve found the best option, it’s just a matter of passing a credit check, filling in some easy paperwork and setting up your direct debit. It really is that easy!
Please seek tax advice before entering an agreement.