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Benefits of Buying vs. Renting Software

Apartments and cars aren’t the only things you can rent for a period of time — software is one of them, too! However, is it actually more beneficial and resourceful for you to rent an application, or should you just purchase a full license for it? This article will answer your question.

Renting or leasing software: Pros, cons, and costs

Renting or leasing software: Pros, cons, and costs
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Vector by Freepik)

Renting, also called leasing software is an easy way to save on expenses, especially if you want to take the service on a test drive first. Many start-up companies and small businesses consider leasing a big money saver, as the costs often come out in their favor.

You can lease just about any kind of software. This includes but isn’t limited to accounting software, e-commerce software, manufacturing software, point-of-sale software, CRM software, CAD software, sales management software, inventory management software, and much more.

The pros of renting software

  • Less upfront expenses. Renting or leasing software requires you to pay only a fraction of the full price. This opens up opportunities for you to save money.
  • Always up to date. With a lease, you’ll never have to worry about purchasing a new version of the software. You’ll always be given the option to rent out the latest, most up to date version at often no additional costs.
  • Support. Most of the time, lease agreements include the cost of technical support and ongoing maintenance. This is extremely good, as you can get in touch with support agents as you begin using a new software.
  • Tax benefits. Most leases are fully deductible from your taxes in the first year.

The cons of renting software

  • Long-term expenses. While renting is less expensive when you pay upfront, in the long run, it’ll cost you more money than purchasing the software. This is because of leasing fees that don’t exist when you purchase software outright. If you plan to work with an application for an extended period of time, you should consider making a full purchase.
  • Contractual obligations. Signing a lease binds you to operate by the lease’s terms and conditions for the full time of the agreement. Even if you stop using the software, or it becomes obsolete, you must continue to make payments until the specified date in your agreement.

Buying software: Pros, cons, and costs

Buying software: Pros, cons, and costs
(
Vector by Freepik)

Sometimes, purchasing software outright is the better option for you or your business. This is especially true if you’re planning on using the software for a long period of time, or if you need to make a full purchase because of licensing.

The pros of purchasing software

  • Lower overall costs. As you only need to make one upfront payment, your overall costs will be lower than if you rented the software for an equal amount of time. This stands even if you account for training, installation and maintenance charges.
  • No recurring payments. Pay outright and own the software forever. You’ll never have to worry about monthly or yearly expenses.
  • Ownership of software. When you buy software, it becomes an asset to your business for as long as you like. This is much better than lease payments, which are considered a liability and bind you to a contract.
  • Tax deductions. If your business is having a good year, you might be able to get a better deduction on taxes by buying outright than you would with leasing.

The cons of purchasing software

  • Upfront costs. Of course, you need to pay a larger sum of money upfront in order to purchase software. This means you need to have a higher cash flow in order to afford such expenses.
  • No upgrades. Most of the time, software companies won’t allow you to upgrade to a newer release, even if you’ve purchased a previous one. This means that you must buy software you know you can use for a long period of time without it going obsolete.
  • No exchanges. Once your transaction is done, you can’t back out. To most software companies, it doesn’t matter if you like the program or not — you already made your purchase, no take backs.
  • Tech support charges. When purchasing upfront, dealing with issues related to the software is usually your business’ responsibility. Any additional costs for maintenance and technical support will be billed to you as opposed to being included in the monthly fee of a rented software.

Final thoughts

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