Many of us have been told that leasing is evil, that people who lease anything are unwisely spending their money. I’ve heard it all – “You’re paying money with nothing to show for it”, “Leasing is more expensive”, “You’re paying for someone else’s depreciation”, and more. While there is a heart of good intentions behind all of these, it’s wise to consider the full implications of any financial transaction, and remember that business and personal finance are two independent worlds.
As a technology leader, I have acquired technology both through purchase and lease. The bottom line to be aware of is that leasing is not just a purely financial transcation. You can’t make a decision on acquiring technology based purely on the numbers. Raw numbers based on finances will always point to a purchase being cheaper because of asset ownership and no finance charges, but they don’t often take into account many of the other considerations that must be made.
When deciding between a lease or purchase of technology, some of these considerations should include:
- Type of equipment or software
- Potential lifespan of the equipment (i.e. beefier specs will last longer)
- Purpose of the equipment (such as different needs between videographer and secretary)
- Equipment manufacturer (Apple products for example retain their value)
- Length of lease
- Type of lease (capital vs operating)
- Ownership at the end of the lease
- Organizational cash availability and financial situation
- Organizational discipline to save and pay cash vs delaying purchases
- Board/Leadership views on leasing
- Available IT support and maintenance contracts
This is not an exhaustive list and each organization may have its own individual items to be aware of. Because technology is constantly aging out, leasing technology and getting on a replacement cycle often reduces IT support expenses and downtime due to newer equipment. This improves profitability or the access and speed to provide timely services to constituents, so the value of the reduced downtime risk outweighs the increased financing cost.
With that said, each organization is unique and must consider which strategy is best for them. The important part is to pick a strategy for each category of equipment and stick with it. A lifecycle of equipment is key to the success of the purchasing strategy, and each type of equipment should have its own lifecycle based on your individual organizational needs. The lifecycle will help dictate how long your equipment will need to run, which in turn will inform your financial projections and modeling.
If your organization is looking to replace aging IT equipment, contact LeadershipOne Technologies today and us help you develop a solid technology acquisition strategy!
