A new lease on tech life

(Last Updated On: March 3, 2014)

Need to buy some ICT kit but don’t have the cash? Leasing is a way you can have something without having to buy it outright. What’s the catch? Here are 10 things you should know about leasing.

1. Almost any equipment can be leased

Desktop computers, laptops, servers, networking equipment, interactive whiteboards, data projectors, AV systems, photocopiers and more, can be leased. Small items like webcams and digital cameras are less likely to leased – but could be included if bought in bulk or part of a ‘bundle’. You should also be able to include freight, installation, software and other associated costs in a lease.

2. Equipment can be new or used

Leases are not restricted only to new equipment – although this is usually the case, except perhaps re-leasing at the end of a contract. It’s always your call but there are two points to bear in mind about used equipment:

  • money saved by opting to go ‘secondhand’ may be a false economy when maintenance, repairs, upgrades and downtime are taken into account;
  • presumably you’re aiming for an ‘improved’ ICT environment and better educational outcomes – there’s a reason why someone else isn’t using the equipment anymore… it’s old!

3. Not all companies offer leases … but someone will

Some companies offer leases on their own products – such as Smart Computer Systems and Konica Minolta, through its financing arm Leasing Solutions. If a company doesn’t offer its own ‘deals’, you will be able to arrange a lease through independent financiers like Equico Equipment Financing and First Lease. Remember, the choice of brand is always yours – if the lease company is pushing you to go with an alternative that you don’t want, walk away and find someone who will.

Incidentally, Equico is the sole Ministry of Education appointed finance provider for the TELA laptop programme.

4. There is no minimum or maximum value of a lease

Different companies may offer different deals but there is no mandatory high or low end to a lease – it’s probably more to do with your own budget! Also, small purchases may just not be worth the paperwork. But, again, if you’re not being offered the deal you require, look elsewhere.

5. The length of a lease is usually between 12 and 60 months

It usually depends on the solution being financed and the outcome you want. Generally, you wouldn’t want to lease equipment for longer that it functional life – which in the case of ICT-related equipment is around 36 months.

6. A lease can be paid off early

A lease should be able to be settled prior to the end of its term. If not, find out why before you sign anything – and if you’re not happy, don’t sign.

7. You may be liable for early repayment penalties

Some companies will charge early repayment penalties, some won’t – it may depend on the value of the equipment and the amount of time remaining on the lease. It can be a process of negotiation. You may also be upgrading. If so, it’s in the leasing company’s best interests to keep you as a customer and not charge any penalty fees. One other thing to remember is any ‘future interest’ that’s been calculated into the leasing payment. You should receive a rebate on this.

8. Know what happens at the end of the lease

Basically, there are two types of lease:

1. ‘Rent to own’ – where you gain ownership at the end of the term at no additional cost

2. ‘Rent to return’ – here you have a number of options:

  • the equipment is returned and the lease terminated (in your initial negotiations, it’s always worth checking who pays for the return of the equipment – 100 computers, for example, aren’t cheap to transport);
  • purchase the equipment – either for a nominal sum or the market value;
  • continue to lease for another defined term, probably one year – but the rental payments should be greatly reduced.

The ‘rent to return’ option is often slightly cheaper to set up and also allows you to make any decision about ownership (and whether there is continuing value to you in retaining the equipment) at the end of the lease rather than at the start.

9. Read the small print

When choosing to lease – and who to lease through – you need to consider more than just the monthly or quarterly lease payment. Additional costs at the start of the lease (such as interim payments prior to fixed start dates) and at the end of the lease (perhaps onerous return requirements) should be factored in to the decision-making process.

Other things to note:

  • beware any deal that extends the term of the lease beyond the equipment’s warranty period, which may result in unexpected repair costs;
  • do not be caught out by leases being automatically extended – always require extensions to be approved (or at the very last notified well in advance);
  • does the equipment need to be returned in its original packaging?;
  • as we’ve already touched on, who’s going to pay for returning the equipment?; and
  • is insurance included in the lease – if so, does it cover theft and damage?

ALWAYS, ALWAYS, read the terms and conditions. And don’t assume they are the ‘same as last time’.

10. You’re negotiating from a position of strength
Don’t be afraid to ‘negotiate’ and get the best deal you can. Companies want to sell you their products or arrange finance. They’re doing you a service … not the other way around. They see schools as long-term, dependable customers – you’re not going to disappear overnight. Make it work in your favour.

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Categories: Article, Issue 1