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How much can I lease?
When you’re thinking about leasing technology, the first place to head is the Ministry of Education‘s website on Managing School Finances which includes a handy Buy vs Lease Tool. They allow you to spend up to 10% of the school’s operation grant/budget on lease payments. This is not the total value of the lease, but what you are actually paying annually. You will need to factor in existing leases (like copiers and teacher laptops) as part of this 10%. And don’t forget to deduct any Ministry subsidies so you’re only including what the school is actually paying for.
Why lease?
Fast-tracking projects
– Leasing gives you access to pre-approved credit, making it much easier to plan bulk procurement.
Exit strategy
– Leasing lets you properly manage the useful life cycle of the device. No more defunct and ageing equipment tying up IT time or office storage space!
– Leasing means you can keep your IT current and up-to-date in years to come, so you have fit-for-purpose technology that allows you to achieve your digital vision.
Negatively geared finance
– These days, you will sometimes actually pay less than the invoice price over the full term of the lease. Companies are able to do this by factoring in the residual value of the product at the end of the term and removing this from what you pay.
Easy end-of-term options
There are three options at the end of the term:
- Return the goods
This is usually accompanied by a replacement lease. - Retain the goods
You can offer to purchase some or all of the goods at “fair market value”, meaning you can make the decision to own the goods at the end of the lease when you have a better idea of whether your technology will continue to be fit for purpose. - Extend the lease
Many schools use this option when they want to change their procurement timing or need longer to make decisions.
Lease almost anything
– Remember that you can also lease intangibles such as software, licensing and installation. You will only ever pay the lease amount, as it is not possible to return these items. Most finance companies limit the amount of intangibles to approximately 30% of the hardware goods value.
How long should the lease term be?
The majority of leases are for a three-year period – however, you can arrange a four-year lease if that suits you better.
There are two key reasons that most leases run for three years:
- Useful life of the device
With the rapid rate of change in technology, it is generally accepted the useful life of a device is around three years. After this time, there is expected wear and tear and new technology naturally supersedes old technology. - Residual values
The value of the device at the end of term changes a lot from three to four years. For example, over a three year period there can be negatively geared financing, but as soon as it gets to four years, the finance does add an additional layer of cost.
Thanks to Ben Halling, one of our Education Business Development Managers, for the handy tips in this article.
Remember you can lease much more than just your technology including a range of equipment from across The Warehouse Group of brands. Want to discuss the advantages of leasing? Talk to your local Account Manager.
