In our area, Burlington, ON, IT network buyers, unlike buyers of MFP printers, are often not familiar with leasing their equipment and software. I think they should give leasing much more consideration. There can be significant benefits from leasing rather than buying.
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One of the first is the ability to spread the cost of the acquisition over the time the computers and software will be used. Your cash flow for payments on the lease can be setup to match the time that you plan on using the equipment.
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In Canada there can be tax benefits since the payments on an operating lease are deductible as a business expense. Purchased hardware and software is also deductible, but in a somewhat more cumbersome process involving capital cost allowances.
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By using a lease to acquire the needed upgrades for a network you can keep your operating capital available for other needs potentially permitting you to expand operations or reduce your bank borrowing.
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Using a staggered lease structure it is possible to setup a flow through refresh program which ensures that your hardware and software don't get stagnant while having a predictable cost. For example, if you usually keep your computer hardware for four years, you can structure a four year lease, each year refreshing twenty five percent of your systems. That way you will never have hardware more than four years old, while being able to refresh the most demanding areas of your operation on an annual basis.
- One of the key benefits of leasing your IT network parts is the discipline it brings to managing the cost base. Often when clients buy their hardware or software they get lulled into forgetting that the expense will need to be repeated at a point in the future when the systems no longer meet their needs. With leasing you build into your operating costs the ongoing cost of refreshing your network. When upgrade time comes at the end of the lease, you are positioned to apply the cash flow to the new replacement hardware and software.
Leasing is a suitable strategy for most businesses and your IT supplier should be able to assist you to determine a suitable leasing structure for your needs. If they are not able then you may have to seek a leasing company directly. Be aware however that not all leases are the same and the clauses around disposal, residuals, end of lease options and decommissioning can be important parts of the discussion.
Have you leased IT assets? How do you plan for IT upgrades and refreshes? What options have worked for you?
Share your experience in the comments below.
Lee K
