No Need To Be At Sea With IT Leasing

The world of IT leasing is no longer unchartered territory. Most of the biggest companies in Britain choose this option, with over 90 percent of those listed in the FTSE 100 leasing their equipment.

This is not surprising – when you analyse the total cost of owning hardware outright, it generally amounts to more than the price tag on the piece of kit, particularly in light of factors such as storing unused equipment, costly upgrades, additional support costs and safe and compliant disposal procedures. Charges that all form part of the total cost of ownership or TCO as it is commonly known.

Furthermore, as we emerge from the worst global recession since the Second World War, organisations are now considering their positions in the market, and realising that to take advantage of the upturn, they’ll need the right technology in place as soon as possible. But most are reluctant to make major IT purchases at this stage – they are wary of jeopardising cash flow or would simply prefer to direct investment towards the core business. In these instances, leasing has become the obvious solution.

Ensuring a leasing contract is aligned with your business needs is essential, so make sure you consider the following:

1. How do we get rid of the kit we already have?

Under the WEEE Directive, it is now the responsibility of the manufacturer of your equipment to collect it and ensure safe and efficient disposal. But it can take weeks, or even months to arrange a collection date, leaving you to securely store the kit in the meantime.  This process is even more complicated when multiple suppliers are involved, and for hardware purchased before the introduction of the Directive you’ll have to pay a third party for this process.

One way around this is to make sure your leasing firm offers collection and disposal of existing kit as part of the contract. You shouldn’t be charged extra for this, and your old equipment will be removed as soon as new kit arrives, avoiding the need for costly storage.

2. What “late-leasing fees” are involved?

Most leasing companies work on a residual value business model. This means that they have to be able to sell the equipment on at the end of the lease.  It is often the case that the business cannot get all the equipment back to the lessor on the day the lease expires. You should make sure that the leasing company will not refuse to retrieve it until all items are ready for collection. You don’t want to incur late leasing charges on the whole batch – a significant and unexpected expense!

3. What de-hire charges are involved?

At the end of the lease, your company will be expected to pay for damage incurred outside of fair wear and tear or loss of equipment. You need to feel confident that the leasing company will deal with these in a reasonable manner. It is perfectly acceptable to ask at the outset for typical examples of de-hire charges and testimonials from existing clients on how this works in reality. A good leasing firm will be happy to oblige.

4. What happens at the end of the lease?

One of the great benefits of leasing is the opportunity to make regular technology refreshes. After three years, you’ll want to make the change quickly, which means you don’t want to be bogged down by unnecessary paperwork associated with audits. Responsible lessors recognise this and will make sure the process is straightforward; they’ll handle the paperwork and present you with concise easy to understand summaries, while always being on hand to deal with queries. A quick check of references from existing clients should help you establish how your prospective leasing partner would handle this.

The bottom line

Entering into a leasing contract shouldn’t be a business headache. IT and finance departments should work closely to understand the full benefits of leasing. Basic analysis will reveal to the CFO that you never pay the full cost of the equipment on a lease. At the same time, the CIO will be relieved to learn that this option removes much of the admin associated with purchasing – from disposal of kit to updates and refreshes, thus ensuring that the TCO is less than if you purchased the equipment outright.

Chris Lloyd is UK sales manager at CSI Leasing