To lease or not to lease?
In today’s world, agility, specialisation, and solution- and service orientation are seen as cornerstones of success – in all fields of business. That’s why owning IT equipment no longer provides any real competitive advantage. Yet more than 80 per cent of the computers, laptops and mobile devices used by corporate customers are still purchased, meaning less than 20 per cent are leased.
So when it is a good idea to lease and when is it not? Here are some of my thoughts on this:
YOU SHOULD NOT LEASE IF
- You do not have cash. Leasing is not a good solution if you’re looking for the last source of capital. If your finances are not in order, but someone is willing to provide you a leasing solution, the chances are that you are going to get screwed. Sooner or later.
- You do not understand the terms and conditions. Documentation related to financial instruments tends to be complex, often with a lot of small print. Unfortunately, this is not usually meant to describe all the great features and benefits of the services provided to the lessee – instead, it’s meant to protect the rights of the lessor. This is partly fair, as the lessor carries the risk. But before you sign, make sure you understand the details of the process to be sure that you are entering into a mutually beneficial relationship.
- The terms and conditions seem too good to be true. The fact is, they probably are and you may have missed something essential. Financing is not charity. Financing is another way to make profit, so make sure that you understand where that profit is being made and what real value-added services you get by leasing.
- You have no control over the assets you are about to purchase or lease. If your asset management is a mess, your lease management will be a nightmare. There are too many examples of this, and such organisations typically end up simply adopting “no-lease” policies. This is an unfortunate outcome as they are no longer able to utilise the most effective financing tool for fixed assets.
YOU SHOULD LEASE IF
- You have the cash. For well-run businesses, leasing is the obvious choice for financing IT equipment. Leasing not only frees up capital, it frees up resources that can be directed to initiatives that really provide a long-term competitive advantage.
- The lessor’s goals match your goals. Leasing is a wonderful tool for optimising the life cycle of your IT devices. If your lessor wants your equipment back as much as you want to get rid of it (in due time), your goals probably match quite well.
- You already have your devices under good control, or you wish to have control over them. A structured approach to leasing provides the opportunity to control IT equipment acquisitions, management and replacement – throughout the equipment life cycle – better than owning them would ever allow. This requires that you have the tools and processes in place to easily manage and follow the lease contracts and periods, as well as the equipment. If you do not have tools for these yet, a good lessor will probably provide them. If it doesn’t, your goals probably don’t match those of the lessor.
- You want to cut down the environmental footprint of your IT equipment. Most of the energy required by a laptop computer is consumed during the manufacturing process. Leasing offers a chance to extend the lifetime of a computer because it will continue its life in a new home after it is resold. Returning the equipment to the lessor has a positive effect on the environment because it reduces the need to manufacture new units.
To me, it seems obvious that leasing is the right choice to help successful businesses become even more successful. And because successful companies certainly use more than 20% of corporate IT devices, many are clearly not taking advantage of this opportunity.
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