Leasing Computers and Other Equipment

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. Before you lease any technology, you need to take some time to consider the advantages and disadvantages of the decision.

ADVANTAGESDISADVANTAGES
  • Budgeting: 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).
  • Cash flow: 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.
  • Technology currency: 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.)
  • Disposal: It often takes time and money to properly dispose of the outdated equipment you own.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.
  • Vendor tie-in: With some lease contracts, 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?
  • Extra expense: 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.
  • End-of-lease terms: Handling the return of the leased equipment in a way that you avoid unexpected fees and penalties can sometimes be difficult.

What to Examine in a Lease Agreement

No one wants to get caught in a lease agreement that is too restrictive or too vague. We recommend that you download our tool, Examine a Lease Agreement. It offers a complete set of guidelines on what to look for and consider before you sign on the dotted line.

Stories from the Field

One of the advantages of doing the lease is that we have a consistent budget year to year to year, because one quarter of that lease is paid each year, so the budget is well planned and consistent.

Thomas Edelblute
Anaheim Public Library, CA

Yes, being as technical as I am, I'd rather buy the machines. I hate the idea of not being able to, because I’ve talked to libraries [that] have done these leasing programs where the company comes in and puts a server in and puts in a bunch of same clients or something like that. But if there’s a problem, you’ve got to call them, and they’ve got to come out and fix it. So there are advantages to it. I could see if someone who doesn’t have someone in-house, like me, that would be a great way to go. Then you don’t have to worry about it; if it breaks, you call somebody, and they come out and fix it. But I’ve never considered the idea of leasing machines. I know that it used to be a big deal. I remember every time I’d go to buy a computer, they’d always be, like, ‘You could lease this today for $28.00 a month,’ or something like that. I never considered it.

Matt Beckstrom
Lewis and Clark Library, MT

I have been talking to other libraries that lease computers, and that’s an option that I could be interested in looking at, but not in the current economy, because I could imagine leasing all of our machines and then not being able to renew the lease because we didn’t have the funding. At least if we buy the machines, we own them.

Sia Stewart
Kingston Public Library, MA

Two YMCAs I work with each bought technology with a lease….In one instance involving a leased server, we had great difficulty closing the agreement and getting the equipment packed and ready to return in order to avoid lease-end buyout fees. The entailing phone tag and multiple emails caused us as much grief as being pushed to replace a server on the timetable dictated by the lease’s expiration date. Another lease problem I encountered concerned a photocopier; the person who set up the contract was no longer with the organization, and when the lease expired, no one knew to ask for a buyout option. As a result, the organization kept paying fees for an extra 18 months when the lease converted to a month-to-month agreement.

Dave Welp
Information Technical Director, Scott Family YMCA
Shared Wisdom, Learning from Technology Mistakes

Further Resources

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