I just offered this response to a similar post. Maybe it is helpful for you as well?
Just for some real world examples using numbers I can speak to....
Say you take a dedicated server, Intel Dual-core 3.4Ghz / 2GB RAM / 1 TB SATA hard drive - $139/mo. You keep the server for 12 months, so at the end of a year you have paid $1,668.
If you know where to look, you can put together a system like that pretty reasonably. So we'll say it costs $300 to purchase the system (we're actually getting them a little cheaper, but YMMV). Colo on that server will run $69/mo (power, space and bandwidth). Again, we'll say you keep the server running for 12 months. This means that at the end of the year you've paid $1,128.
Given the above numbers, you save $540 by going colocated over the course of a year.
Some people are more comfortable leasing the equipment since that way if something goes wrong, the provider is responsible. There are several ways to look at that. The first is, well of course that is true! And from a convenience standpoint, maybe it makes sense in your case to pay more for that benefit. Of course, with the money that you're saving, if the server completely tanks, it's likely you could buy another one and have it either installed same day or overnighted and still come out ahead, financially.
Just a matter of taking what's important to you and making your decision based on that.