Pros and Cons of leasing equipment

[Little-Miss]

Remembering this is my first role as a NM!

 

What are the pros and cons?

Does it end up costing more in the long run?

Are there any nasty hidden catches?

 

I'm after a new server and my school (like many) doesnt have a massive IT budget and was wondering if this could be an option for us. I suppose one pro is that instead of having to pay out one massive lump of money to buy them outright, it would be paid yearly (?).

 

Thanks

[john]

LEAs like to see the legal paperwork upfront to scruitince the lease before signing so check with your Bursar what the procedures are. As for the benefit yes you get the stuff you need / want now but without the mass costs but it stings you in the pocket for the next 3-5 years. I have a lot of kit on lease (SMT decision not mine) and I don't agree or like it, my start of year budget statment has gone to half used already after annual costs EG MS Licence Costs and Leasing agreements. Fine it spreads the payments but I just don't think its worth it with things like PCs, at the end of the agreements you will pay a sum to own the kit (well in most cases some you have to return it to them!!) but after 3-5 years the kit is probably worthless anyway and in some cases ready for the junk cupboard so is it worth it. I would avoid leasing anything other than Photocopiers, and just push management for the money. I'm looking at needing a good injection of cash to fix what the management want but I don't want ANOTHER leasing agreement as its only delaying the pain and stopping me developing each year for the next 3-5 years so it shouldn't be taken that lightly to be honest.

[steveg]

The only leases we have are for sets of laptops, as they are paid for monthly by parents, and the school didn't have the money to pay for them up front. This year however we have managed to find enough, and it will be the first set we've got without leasing them, which will probably save us around 10% in leasing costs.

 

Pro's are:

 

You can buy kit that you just couldnt afford in the current financial year.

If you lease almost everything you know your IT hardware is going to cost you x ammount per year, and all gets replaced every x years. (you can achieve this anyway with buying new kit at appropriate times)

 

Con's are:

 

It costs more overall. (I think i'm right in thinking business can somehow save tax or something leasing kit, which is a benifit schools dont get? May be totally wrong there)

Next year's IT budget will be significantly less as you'll be paying the lease from this year, so you can get caught in a cycle of only being able to lease future kit.

 

Unless you really have to i'd try not to lease anything, as in the long run it will cost you more.

 

Steve

[dhicks]

I'm after a new server and my school (like many) doesnt have a massive IT budget

 

I wouldn't lease computers or similar, but leasing printer/photocopiers seems to work well. You get a lower number of decent, efficient, quality machines rather than everyone having their own fault-prone inkjet that costs loads to run. If nothing else it at least makes people think before printing anything out. plus repairs (a specialist job that requires someone who knows what they're doing and has the spare parts, whereas modern PC hardware repair consists of find-the-duff-part-and-replace-it) are handled by an on-call specialist.

 

How much do you have to spend on a server, what task(s) do you expect it to do and for how many client machines? I'm sure we can figure out how to get it as cheap as possible.

 

--

David Hicks

[broc]

Leasing costs more; you pay for two things in particular:

 

1) Depreciation. In other words the purchase cost less the residual value at the end of the lease, which for a PC or laptop is almost all of the cost of the equipment anyway

 

2) The cost of 'money'.... the leasing company has to 'borrow' the money to buy the equipment, so you pay their finance costs plus their management costs associated with the leasing.

 

In my view, leasing is more suited to business, where accountants are more worried about capital expenditure vs revenue expenditure and the impact it has on their balance sheets and corporate assets

 

Leasing ties the 'customer' in long-term, which suppliers like too.

 

Like many other schools, we 'rent' our photocopiers, everything else we buy.

[Butuz]

One thing that has not been brought up as a benefit of leasing is the fact that whatever money you have tied up in the lease is guaranteed to be paid by the school every year regardless of how bad the school money pot gets.

 

I.e. if you have a lease where your paying £20,000 per year for 5 years - the SMT can't just come to you and say - "moneys bad this year, we're not paying the lease" like they can with internal school budgets. In effect the capital value of the lease is "protected" from SMT/bursar interference. If you do default on a payment the company come in and take all your leased equipment off you (in reality no school in their right mind is going to default a payment).

 

This is a big benefit - and this is why we lease a lot of stuff, because sometimes we get given £60k per year for ICT and sometimes I get £5k per year (the last 2 years!), whereas our lease payments always go out on the dot and that capital value is always there for us to spend.

 

The lease allows me to protect the long term funding for ICT, and also forward plan in a way that's impossible with the current budgets. I hate to think what ICT provision would be like here if we did not have a lease as we've had some very very lean years here and ICT is a big and easy target before going down the route of sacking staff.

 

Big benefit. And worth the cost of the interest rates.

 

Of course ideally we wouldn’t need to lease (and pay some fat cat company interest through the nose) - but this is not an ideal world I live in!

 

Butuz

Edited April 29, 2009 by Butuz

[featured_spectre]

Leasing in general is only worth it if you are getting a high number of equipment, something like 100 PC's or laptops in 1 hit. Otherwise it plainly isnt worth it. You would be paying around 20% more leasing due to the fee's and interest charges, and on top you will be paying something like 10% at the end to buy the equipment outright.

[Mandy]

We provide leasing for lots of education customers - they find it really helps out. It means they can get everything they want in one hit and don't have to commit themselves to a big spend at once, also they sometimes spread costs across other departments budgets.

[Bezwick]

When i first started at the school my Predesessor had got around 50 machines on a 4 year lease, I think it was one of the reasons he left as the school had been totally ripped off.

The machines that we had been supplied had been seriously over valued, in other words the lease implied they were £700 machines when in reality they were probably half that.

A clause in the contract basically stated that the leasing company were not responsible for manuafacturing faults, which meant we had to pay to replace the motherboards in half of the machines when the capacitors on them blew. (no idea where vthe leasing company ahd bought them from so we couldnt get ant back off their suppliers)

A year into the lease the company went bust, but our lease was bought by a credit agency, which essentially meant that we had to pay the remaining three years on the leases, without any support what so ever.

Also when we finally got to the end of the lease (most of the PC's had been sat in a storage cupboard a year by then as they were pretty much all junk), we were informed in accordance of the lease we could return the machines, however we would have to pay courrier costs and any machines that were deamed to "not in a usable state" we would be charged for. In other words at the end of or lease we had to buy these machine off the company and pay for them to be scrapped. In the end i think the school must have paid nearly three times what these machines were worth and they only worked properly for about 4 months, but we were stuck with them for 4 years.

 

DONT DO IT

 

never again

[pete]

We lease most of our desktop machines and all the copiers because of the aforementioned forced committment to the refresh cycle. It does cost a bit more (you can reduce the gap if you negotiate ruthlessly and take no prisoners), but makes balancing the budget easier for the bursar as he doesn't experience big jumps in spending.

 

We have the option to buy at the end of the lease (for about £1-£5/unit) and if a dept needs wordprocessing/email machines but has no cash, they get reliable machines that'll last another year or two at least for no real cost.

 

Servers and laptops are bought outright.

 

We ask for quotes as normal via our chosen suppliers, negotiate the price down as much as possible and then ask for leasing options.

Edited April 29, 2009 by pete

[imiddleton25]

I think it depends on the deal you do

When 3 years ago i looked at purchasing 21 Dell workstations and 10 blade servers

the thing thta sold it to me was the warentee and gold support.

Costs were £1 per machine less to lease than to buy over 3 years and that included 4 hour response for support.

I have used support just last week when the tape library died. 3 hours latter a new one was fitted configured and working.

 

The first workstaions go back August this year the replacements if i go with Dell again are £6 / machine more than last time and better specs.

 

The bursar prefers this as long term budgets are more accurate and i always get the computers i need as September would be a bit difficult with a computer suite with no pc in.

 

Win Win i recon.

[MK1]

When Leasing laptops over 3 years or less using a compliant operating lease, you actually pay back less than you would have if you had bought them outright. My advise is talk to a trusted leasing company. Why pay outright for equipment that in three years will be well out of warranty and battered and bruised, when you can simply lease them for three years , pay back less than the cash price and simply give them back and start with new equipment.. Sounds like the way forward to me. MK

[pcstru]

Why pay outright for equipment that in three years will be well out of warranty and battered and bruised, when you can simply lease them for three years , pay back less than the cash price and simply give them back and start with new equipment.. Sounds like the way forward to me. MK

 

Because at best it makes managing budgetary risk difficult. When you buy equipment you are playing within the confines of a known, approved budget. If you lease, you are making assumptions about future budgets. So had I leased laptops three years ago, I would now be faced with replacing them all when budgets are generally being cut. Having bought them and the majority still being perfectly functional, I can be flexible about replacement. Generally leasing is asking me to commit significant portions of future years budgets reducing flexibility. Where it makes sense to lease (IMO) is on items with low lifetimes, high maintenance regimes and possibly large part replacement costs : so high volume photocopiers (ours do 1.5 million copies per year and need high levels of availability) are definitely worth leasing as a way of managing the risk of suddenly facing a large unforecast budget hit to replace parts.

[GrumbleDook]

Some LAs will also provide asset purchase schemes, usually coming in at a better price than leasing.