Leasing Computers and I.T. Equipment for Your Nonprofit
Originally published at TechSoup as Leasing Computers and I.T. Equipment for Your Nonprofit on September 16, 2008
As with cars, TVs or any other large, expensive outlay, you don’t have to own the technology in your organization. You can rent desktop machines, servers, networking equipment and just about anything else. And while you usually pay a bit more in the long run, some organizations find it easier from a purchasing and accounting viewpoint.
Advantages and Disadvantages of Leasing Computers
When you buy equipment, your expenses can vary wildly from year to year. With leased equipment, you don’t have to work so hard to balance your annual budgets. Instead, the costs are spread evenly over the term of the lease (usually from one to three years).
If your cash on hand is less than you’d like, leasing might cost you less in the long run than taking out a bank loan or using a credit card. An accountant can help you weigh your options.
If your leases run for short periods of time, you’ll always have fairly up-to-date equipment (i.e., every three years or so, you’ll be returning the old computers and getting the latest, fastest PCs.)
It often takes time and money to properly dispose of the outdated equipment you own. When your lease is up, however, you usually send the leased hardware back to the vendor, unless you decide to pay the buyout cost and keep the equipment.
Loss of control:
There might be significant restrictions on what you can and can’t do to leased equipment.
With some leases, you may be tied into using equipment from one vendor for several years. If your needs change suddenly, will you be able to get out of the lease without paying unreasonable penalties?
When you lease, you’re paying a premium because the vendor is taking on certain risks and obligations that they wouldn’t have if they just sold you the computer outright. Lease Versus Purchase from TechLearning will give you some idea of the extra costs you incur when you lease.
With some leases, you have to pay close attention at the end-of-the-lease period in order to avoid unexpected fees and penalties.
What to Examine in the Lease Agreement
Do your homework and read the terms of the lease carefully before signing. The following are some questions you’ll want to consider:
- What happens at the end of the lease?
- In the past, some leasing companies required that you return to them the exact same machine that they sent you originally, and they checked the serial number to make certain. However, more and more, companies are willing to be flexible and accept a computer that’s comparable in most respects to the one they loaned you.
- Do you have a good asset-tracking or asset management system?
- Even though companies are becoming more patient and understanding about end-of-lease arrangements, you still have to return something to them in fairly good condition. If you constantly have trouble tracking and locating your equipment, you should buy rather than lease.
- Are there other end-of-lease terms?
- Can you buy the equipment and at what price? How strict will they be about the condition of the computers? Don’t be afraid to push back if the leasing company gives you trouble, because you may be negotiating a new lease at the same time you’re returning the old equipment.
- Who is responsible for maintenance and repair?
- Also, while vendors will probably replace defective parts during the period of the lease, they usually don’t repair damage done by staff and clients, whether accidental or intentional.
- Does the lease lock you into any financial issues downstream?
- If possible, show the lease to your accountant, your director, your CFO or whoever it is that balances your books. The structure of the lease could have unforeseen consequences on your budgets and your cash flow, so you want to get their approval if possible.
- Does the leasing company require an up-front down payment, security deposit, proof of insurance or some other hedge against losses on their part?
- If you have a good credit history, you probably won’t have to bother with this stipulation, but check the leasing agreement to make sure.
Should You Buy or Lease and Lease versus Purchase both have good tips on this topic. Also, Dave Welp from the Scott Family YMCA had some unpleasant experiences with leasing, which he describes in Shared Wisdom, Learning from Technology Mistakes. Although there are third-party leasing companies, some IT managers feel more comfortable leasing directly from the manufacturer. For example, Dell Financial Services, HP Financial Services and IBM all have a wide array of leasing options.