TO LEASE, OR NOT TO LEASE?

To lease, or not to lease? Are you better to own your Information Technology (IT) hardware and software, or are you better to lease it? It is common business practice to lease company cars, which have a pretty steep rate of depreciation, and it is becoming increasingly popular to lease your IT infrastructure - with some parts of your IT equipment being depreciated at up to 48% per annum.

In this article we explain some of the benefits of leasing vs owning, with the aim of presenting you with an option that might allow you to get the IT system you require now, for the projected growth of the future.

IT equipment today typically has a very limited lifespan. So is it a business asset or an expensive consumable? The question you need to ask is “does it make sense to use your hard earned capital to pay for the use of rapidly depreciating technology?”. Owning technology doesn?t necessarily make good business sense, especially as hardware and software drive each other to be more powerful and more resource hungry in a seemingly never ending spiral.

The rental option is ideal for equipment with a realistic 2-3 year life. If you are financing assets that have a long usable life (4 years +) and that retain their value, then a Finance Lease (Lease-to-Own) may better suit your situation.

For businesses it is important and at times critical to have the latest technology, or to put infrastructure in place now that allows for future growth. With the leasing option you can put your cash to better use and keep up with technology. You can upgrade to new equipment during your rental agreement or choose from many options at the end of term.

There are a number of good leasing solutions available, and we believe that any leasing solution should include the following:

Simple processes and no hidden fees

• The documentation is all in plain English and transactions are processed quickly and easily.
• There are no establishment fees, ongoing charges, or hidden surprises at the end of your agreement that will disadvantage you or trap you for an extended period.

Conserve your cash

• No deposit is required; you just pay the first monthly rental payment in advance. There are options available with no payments for the first three or six months.
• Put your capital to better use in your organisation, enabling you to smooth the cost of acquisition and conserve working capital.

Pay for equipment as you use it

• Pay for the equipment as you use it, spreading the cost over the useful life of the solution and improve your cash flow.
• Choose the rental term that suits your needs and budget. You can lease equipment from $1,000 over 2, 3, 4 or 5 year terms.

More than doubles your purchasing power.

• Compared to using the same annual budget to purchase, leasing lets you secure equipment worth more than double the value.
• Affordable monthly payments allow you to obtain the solution that best suits your business needs. The fixed monthly expense makes budgeting easy.

Tax deductible for business*

• Monthly rental payments are an operating expense (like rent, telephone or electricity bills) and are typically 100% tax deductible. Payments are off balance sheet.
• For the Finance Lease option, equipment is treated as a Capital expenditure item on your balance sheet, with interest and depreciation claimed as a tax deduction.

*Contact your tax advisor for more information.

Bundling

• You can bundle hardware, software, warranties, installation services and training into the lease agreement. We recommend taking advantage of this facility to match the warranty period of your equipment with the lease term.

The flexibility to upgrade to new technology

• You are able to future-proof your business technology needs. Avoid the hassle of being locked into owning and disposing of outdated technology.
• Gain the benefits of using the most up to date technology when you need it.
• With most solutions you can choose to upgrade to new equipment before the end of your agreement.

Lots of End of Term Options
End of term options should give your business the flexibility to manage changing IT needs, helping you to stay productive and ahead of your competition. Options include:

• Upgrade to the latest technology with a new agreement. When upgrading, you can make an offer to purchase your old equipment.
• Replace your old equipment with the latest technology and return your old equipment.
• Extend your agreement if you are happy with the equipment.
• Offer to purchase the equipment if you?d like to own it.
• Return the equipment if it?s no longer needed.

The decision for each individual and company is whether the leasing proposition makes financial sense to them. There are lots of reasons why leasing can be a smart option. The popularity of leasing IT technology is certainly growing, please contact us if you would like a lease quote or want to know more about leasing options.