Dedicated Hosting = The company provides the server and the bandwidth(and sometimes extras such as control panel,etc.) for a monthly fee. Under dedicated hosting you NEVER own the server. In other words you are pretty much borrowing a server and connection for the monthly fee you pay(or leasing rather). Sometimes dedicated hosting also can include a certain level of managed services or service level agreements, meaning they will agree to do a certain amount of monitoring and upkeep to the server along with providing the connection and the server,etc.
Colocation = The company rents out space and connection to you, BUT you provide the server. You own your own server and place it in there facility. They only(in most cases anyway) provide the space to store your server and the connection to your server for a monthly fee.
Depending on what you intend on doing and on what scale you intend on doing it one or a combination of the two may be the best way to go. If your starting out i suggest getting a reseller account from someone like MCHost.com or EarHost.com. This would allow you to get familiar with the business and the duties you will have to perform without taking a huge risk.
If you succeed you can always transfer your customers to your own server later that is either rented as a dedicated server or colocated somewhere.
Ive put a 2 years into learning about the hosting business so far, and all though ive learned alot... Im not near to the point where i could say i could run a complete hosting business from the ground up. Reseller accounts make it seem like its the next best thing since Pepsi, but its not as simple as reseller accounts make it sound.. Start small and learn everything you can through books, forums, websites, etc.. Be sure to familiarize your self with linux, apache, etc.. dont just think you can do everything from a control panel, because you cant.
Can you not "lease to own" a dedicated server oftentimes? I know most companies don't do this, but I can remember coming across a few that did
Yes you can lease to own a server from a company such as Dell etc, in most circumstances it's a more expensive monthly fee or a buy out at the end.... I have spoken with companies that would allow you buy the server from a third party at the end of a standard lease for next to nothing (Not lease to own, so cheaper monthly) They basically have someone buy the server at the end of your contract and then you buy it from them - Tax reasons
In short, yes lease to own is an option but no real point - Lease to renew with better equipment after the term is a better way to go IMHO
You must have a server of your own right now you could always look towards a credit card.. Although i dont suggest this as credit cards are just a bad financial trap period in my opinion, BUT if your situation calls for it and you want to lease to own, then credit card is another option.
WHY? Because like he said leasing to own is normally more expensive, on a credit card your talking a few dollars a month(beware it will take you a lifetime to pay off). However if you know your revenue will pick up you could then simply pay the payments until your ready to pay the balance...
Its not the best way to go, but if you HAVE to have a server now, then its an option, and its cheaper than leasing to own.
But if you dont think your revenue from the server will pick up or get started anytime soon, dont do it because you will be paying on it for some time if you pay a minimum payment. And the credit card company doesnt care if your making money on your server or not, and if you ruin your credt you can forget going into business for a while.
Just a few different ways to look at, you know you better than i do. May be a good way for you to go, may not be.
OH, but by the way.. if your starting out i would suggest a managed dedicated solution from somewhere like rackspace. Why, because if you screw something up and your colocating remote hand fee's and tech support fee's can add up.
I would start with,(if you choose to skip reseller account options)a managed solution or a colocation facility that offers a managed package for an extra fee.
"OH, but by the way.. if your starting out i would suggest a managed dedicated solution from somewhere like rackspace. Why, because if you screw something up and your colocating remote hand fee's and tech support fee's can add up. "
Just a note from a Rackspace.com fanatic and advocate.
Rackspace does not provide true managed services. They manage the hardware. They manage the network. To a small degree, they manage the applications they install on the server.
However, there is a long list of items they do not touch, support, or otherwise manage.
So when you state remote hands, Rackspace.com does have fees associated with going outside the scope of its support; and will work with various parnters (we are one) to compliment it services so that a true managed service picture is provided.