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IT Equipment: Buying vs. Leasing

Wednesday, June 15, 2005

I found this great article on ITEdge which agains highlights some of the great options leasing offers.

With Chuck Thomas, director of Worldwide SMB Sales and Marketing for IBM Global Financing, the world's largest information technology financier, and a member of the board of directors of the Equipment Leasing Association.

Question: What are the primary advantages to leasing technical equipment vs. buying?

Thomas' Answer: Leasing is especially attractive for information technology equipment. IT assets are usually at the heart of business operations and a key enabler for growth and innovation. Today's attractive IT lease rates make it possible for companies to acquire the IT tools they need to be competitive in their marketplace while still preserving capital and credit lines for other core investments. In addition, leasing can provide important other benefits to protect and manage IT investments such as attractive technology upgrade options, Web tools for asset tracking and management, and safe and secure asset and data disposal.

Question: Is leasing generally the best alternative? Or are there situations where buying is clearly a better option?

Thomas' Answer : Leasing, especially a Fair Market Value lease based on residual value, is often the most attractive acquisition alternative, but there are situations where outright ownership may be preferred. It usually comes down to simple economics. Are there competitive lease offerings available from reputable lessors? An example where purchase might be favored could be equipment that will be used, with certainty, by a company over a very long period of time (seven to 10 years) when the usual market term is much shorter. Another example could be specialty assets that have a limited secondary market. In these instances, lessors may not be able to offer as compelling an economic benefit as purchase.

Question: What are the primary items companies should consider when evaluating lease financing arrangements?

Thomas' Answer: Selecting the right lessor is as important as the lease vs. purchase decision itself. Unfortunately, some companies choose one lessor over another based solely on the monthly cost, or lease rate factor. Their theory is that the lower the cost, the better the deal. This isn't always the case. Obviously, monthly cost is important, but companies need to remember that they are not just buying a rate; they are buying a contract and a relationship that could extend for several years through technology upgrades, extensions and additional equipment.

Some important contract factors companies should consider include: fair and straightforward contract terms and business practices, documented mid-term and end-of-lease options and responsibilities, and no hidden charges. The contract should completely document the lease or financing transaction. Companies also need to consider a lessor's reputation for integrity, honesty and reliability; their IT asset financing knowledge; and the skill and availability of their sales and customer support personnel. Global companies also need to consider the lessor's capabilities to provide consistent financing offerings, processes and support around the world."

If you are looking for help getting your hands on some new IT Equipment with Equipment Leasing, contact GCR Capital. We'd be delighted to help you.

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