In our fast-paced, highly competitive lives access to technology is essential in order to maintain a competitive advantage. This critical technology, however, does not come without a price.
While views on IT are constantly changing, one thing remains consistent. The approach on funding, as cash still dominates. Many businesses opt to pay cash up-front for technology-based equipment and IT services. This is a means of effectively prepaying IT expenses, many years In advance, giving little to no thought as to how their needs will change over time.
IT hardware is likely to depreciate in value over time and has a range of hidden costs associated with it, including, installation of the equipment, managing and maintenance of the assets, and removing data once it reaches end-of-life.
Benefits of Leasing IT Equipment
Changes appear to be headed our way where the investment of IT equipment is concerned, and the leasing of such equipment is becoming a far more feasible option for many organizations. By leasing the necessary equipment, the ownership risk is transferred from the business owner to the lender. Also, financing costs are able to be claimed as an operating expense. Another major benefit to leasing is that it can free up cash flow that can be better served being used for other business purposes.
How It Works
Operator leases work by the lender paying for the customer’s required equipment. The customer then agrees to lease or rent the equipment for an agreed period of time, generally a period of a few years. Once the duration of the term has lapsed, the customer has several options available to them, as described below:
- The equipment can be returned, and exchanged for updated models.
- Continue the rental term on a month to month basis, taking the time to evaluate costs, financing options and improved technologies before deciding your next move.
- Purchase the IT equipment for market value
- use a combination of all of the above.
Tips For Leasing IT
Described below are several useful tips to help ensure you get the most out of your IT lease.
- Be sure to use an asset management solution that will manage your IT equipment for the entirety of its life-cycle, including removal at the end-of-life stage.
- Take special note of return clauses and policies, as it should be simple to return the equipment.
- Ensure the IT provider has your security in mind. Determine their policies for wiping your data upon return of the equipment.
- Regularly review contracts to look for ways to create more flexibility from the lender.
- Take the time to clearly understand your annual IT spending’s. An Asset Finance specialist can provide guidance and advice on the different financing options, and your accountant can help to determine what is the right choice for you.