Technology: Lease vs. Purchase - A Closer Look
Almost every time I meet with a new client, at some point our discussion leads to the question of leasing vs. purchasing the technology they require to give their organization a competitive advantage. It's a fairly complex question which seldom ever ends with a quick answer, but it's a great way for me to dig further into my client's business strategies and expectations for our partnership.
Not always do these conversations lead us to a decision to lease, but I do my best every time to explain that there is more to leasing than simply financing a technology acquisition. Once my clients fully understand the benefits of leasing, no less than 80% of those clients find leasing a preferable option to purchasing technology-based solutions for their businesses.
While I'm quick to admit that leasing is not the ultimate solution in every situation, I'd also be lying if I said I wasn't a fan of the flexibility leasing offers my clients. Having provided that caveat, here are my thoughts on leasing:
Office
equipment, like most other technology-based investments, ages very quickly.
Technology changes at such a rapid pace that office equipment and software can
become obsolete within a matter of just a few years; whereas most organizations
can't invest the capital required to completely refresh their technology that
often.
Leasing,
on the other hand, enables organizations to exchange obsolete technology for
the “latest and greatest” far more frequently, based upon the term of the lease
contract. Shorter term leases tend to generate a higher monthly payment, but
allow for more frequent technology upgrades, while longer lease terms tend to
reduce an organization’s monthly spending by committing to holding on to leased
technology for a slightly longer time period (but still avoiding the cost of total
obsolescence which tends to follow technology
purchases).
Furthermore,
this technology “lease vs. buy” question cannot be answered
exclusively by applying a financial formula or calculating interest rates. Employee productivity, equipment lifespan,
the competitive advantage to be gained by technology, and even customer and employee perception are just a few
of the factors to be weighed in a decision process that is ultimately intended to help
organizations achieve business objectives, as opposed to simply acquire hardware.
Finally,
the flexibility of leasing is not only focused on the initial lease term. Quite
often, the decreasing costs of today’s technology also encourage lease
upgrades. As newer technologies become more mainstream
and acquisition prices of those technologies trend downward, it often becomes
more fiscally advantageous for an organization to refresh technology before the
current lease actually expires, or upgrade
their lease to include the newer technology (generally renewing the
lease term to its original time frame…most often somewhere between 36 and 63
months).
Ultimately,
leasing can allow businesses to upgrade technology more regularly without a
major outlay of capital. This allows organizations to remain competitive and to
streamline their office technology with industry standards, as needed, without
being “trapped” by a purchasing decision made several years earlier, and based
on technology which has since been rendered obsolete.
Brian
Merson
Major
Account Executive / HP Print Security Specialist
Centric Business Systems
Centric Business Systems
