According to the Equipment Leasing Association, more than 80 percent of U.S. companies lease all or some of their equipment. The same organization estimates that the value of IT equipment placed on lease this year alone will top $28 billion. Why are so many corporations choosing to lease instead of purchase? These companies realize that the true value of their equipment comes from its use, not its ownership. Now more than ever, leasing companies are making it easy for corporations to acquire the latest technologies while optimizing their IT budgets.
Implementing a strategy to acquire, finance, and manage technology assets affects more than just the IT department. Today’s decisions will impact the financial and operational viability of a company for years. The decision to lease these assets will provide benefits that appeal to IT, finance, operations, and legal executives alike.
Flexibility is key to a proactive asset management strategy. First and foremost, leasing provides a built-in refresh strategy, ensuring users get new systems every two to three years. When companies purchase their IT assets, users often bear the burden of dealing with outdated hardware, simply to maximize depreciation rules. Leasing also allows companies the ability to upgrade, extend, or even replace assets as their needs change, without causing an adverse effect on budgets. This flexibility gives IT executives the control they need to meet changing hardware requirements, while operating within a fixed budget.
A number of companies like leasing because it provides a predictable monthly expense, making it easier to manage cash flow and budgets. True operating leases also keep debt off company balance sheets, thus improving performance ratios and keeping lines of credit open for other needs. Tax benefits can include deductions for lease payments and the elimination of book write downs at equipment disposal.
Many companies don’t realize leasing compared to owning actually reduces costs. Because leasing companies plan to resell the equipment at the end of the lease, they will invest in the equipment based on a formula that includes the anticipated residual value of the equipment. This upfront investment by the leasing company means the present value of the lease will always be lower than the cost of the equipment if purchased.
Of course, today’s leasing companies offer much more than a low rate and a refresh strategy. While capabilities vary between various lessors, there’s an industrywide focus on value-added services. Simply put, to remain competitive, leasing companies are offering a wide array of services and solutions aimed at reducing the hassles of owning technology equipment. This focus on improving convenience cuts right to the customer’s bottom line, providing real cost savings that must be factored into any Total Cost of Ownership (TCO) analysis.
Many of the services designed to help companies acquire, manage, and dispose of equipment are included in the cost of the lease, depending upon the lessor. For example, some leasing companies handle order processing and vendor administration on behalf of their customers. Others provide, for example, tools such as online asset tracking, which greatly reduce the administrative time and cost of keeping track of thousands of IT assets and can provide vital information about all aspects of assets on lease.
A growing area of concern for many companies is proper disposal of IT assets. Let’s face it—it’s not easy to get rid of computers, as most IT and legal executives would agree. e-Waste is growing into a problem that annually amasses millions of tons of electronic scrap. The failure to adequately protect customers’ private data is causing legal and public relations nightmares for large and small corporations alike. Many companies aren’t properly protecting themselves against these problems, leaving themselves vulnerable to prosecution from any one of a myriad of federal and state laws designed to protect consumers and the environment.
A number of leasing companies are helping their customers mitigate the risks associated with these issues. Partnering with a lessor that will sanitize customers’ data from hard drives, and then either resell or recycle the hardware, can satisfy a company’s legal requirements. A lessor that performs these critical services in-house with their own employees provides additional protection for customers. Leasing through a partner with these capabilities also helps ensure a disposal plan is in place before equipment is even acquired. No longer will companies have the need to store used equipment in a warehouse to avoid the large costs and potential risks of disposal.
Especially when considering TCO, leasing is a lower-cost alternative to purchasing. Add in the convenience that lessors can provide, and leasing is the clear choice for acquiring, managing, and disposing of IT assets.