Buy now, pay later?

The problem is, you need state of the art equipment, but the hardware just keeps changing.

You see the advertisements for a personal computer costing less than pounds 1,000 and think: "Yes, I can just about afford that." Then you find out that the price excludes a screen. Then you realise that you need a printer, and maybe a modem too. Then you discover that the bundled software isn't really up to the job and the programs from your old machine don't run very well on the new one. Before you know it, you are in for over pounds 2,000.

Laying your hands on that kind of money isn't always easy, especially when the same amount could be spent in ways which more directly develop your business. In the long run, you know that the computer will deliver a payback but, in the short term, you might prefer to hang on to your money.

Apart from the problem of getting the funding in the first place, computer purchases are dogged by another problem: developments occur at such a pace that today's state-of-the-art machine will tomorrow be distinctly dated. It still does all the things you bought it for, but your needs and desires will almost certainly change as time goes by. Unless you have a place in your organisation for dated equipment or you are happy handing it over to the local college, you may find that you resent having to buy the latest equipment every two or three years.

Individuals and small business can finance their computer purchases through a variety of rental, leasing and loan schemes. A personal or business loan probably appears the cheapest option, based on monthly repayments, until you remember that at the end of the term you have something with a very low value. The same problem applies to a lease-purchase scheme. Better, perhaps, to go for a flexible rental or lease-rental scheme which allows you to upgrade or replace the equipment periodically without financial penalty.

Many magazine advertisements for personal computers now contain details of finance options. A simple `easy terms' agreement may be available for between 18 and 20 percent annual percentage rate (APR) and some companies, like Mesh, will give six months free credit. Others offer a business lease and publish the weekly payment (usually something like pounds 9 per pounds 1000) alongside the purchase price. Although the finance scheme may be branded as the manufacturer's own, it is usually operated by a separate company. Gateway, for example, uses Schroder Finance while Elonex uses Sales Finance.

The finance companies themselves offer funding for far more than just the personal computer. Sales Finance, for example, will cover the cost of hardware, software, installation and maintenance within its Computer Systems Rental scheme. You are allowed to upgrade or replace the equipment at any point in the contract. Depending on what you do and when you do it, the payments may be increased or the term extended.

At the more modest end of the scale, Radio Rentals, provides computers, printers and service through its Option 2 Own scheme. You can buy the computer over 39 months or you can return it after the first year with nothing more to pay. Alternatively, you can upgrade to a more expensive system. If your needs are modest, you can also buy refurbished machines at a lower rental. Typical prices for new desktop computers are pounds 55 per month while used ones start at pounds 40 per month.

If you are in business, you may feel most comfortable with a lease-rental which gives you the flexibility to upgrade your equipment at any time. Although this will cost more than an outright purchase, your cashflow won't suffer and you will be protected from major shifts in the computer market.