The advantages of leasing technology equipment are widely known. From ease of upgrades, to avoiding large capital outlays for the purchase of equipment, leasing can provide a flexible and convenient solution to any business’ technology requirements.
However, understanding what questions you should ask when negotiating a leasing contract is almost as important as finding a reliable leasing partner.
To help you navigate your way and understand how leasing could work for your business, here are some helpful points to guide your decision.
It is good practice to get clarity around any other or hidden costs you might have to pay in addition to the lease payments shown on the quote.
Some lease companies charge additional part payments, commonly known as ‘interim’ or ‘per diem’ payments, at the beginning of the lease, as well as additional payments post maturity.
For your own comfort, it might pay to get something in writing from your lease partner confirming that they will not charge an interim payment, nor will they automatically extend your lease at maturity should you fail to give sufficient notice of your intention to return the equipment.
Request client references from other businesses that have experienced the full lease life cycle, from pricing, supplier payment to end of lease management. Leasing more often than not is about relationships.
A lot can happen during the term of a lease, and it is important to have a strong relationship and two-way communication with your lease partner to ensure their support during times of change or misfortune.
When leasing assets it is beneficial to have all leases on their own agreement. It is not uncommon for some leasing companies to offer to refinance all existing leases into one new lease; however this will make it difficult to track how long you have had specific assets for.
In some cases there could be assets which you have leased for two years and then refinanced for another 36 month term. This would mean ending up with five year old equipment at the end of the lease, where your original intention was to only lease it for three years. This is not good practice but still happens fairly often.
New versus Secondhand Equipment
Leasing is most beneficial when it is on new equipment and under the manufacturer’s warranty. Whilst there may be a temptation to acquire secondhand or ex-lease equipment due to the price being marginally cheaper, there are other indirect costs to be considered.
Secondhand equipment is more likely to incur costly technical management time over the term of the lease as it may already be outside of the recommended useful life of the equipment. This can cause increased ‘downtime’ and decrease efficiency.
Real Time Access to your Lease Information
Request easy access to track a full log of your assets through an online portal. This will help you to keep track of when to notify your lease provider of what you would like to do at the end of lease.
Additionally, it also provides one centralised point for all your information, regardless of what you buy and whom from.
End of Lease
Ensure the company providing the lease contract will take responsibility for the equipment at the end of the lease, specifically the return and remarketing process.
Diarise your lease expiry date three months prior to the end of the lease to discuss your options with your lease partner. This way you will ensure you have ample time to decide and arrange for the next step, whether that be returning the equipment and upgrading, or extending the lease.
Some lease companies will also charge a penalty for returning the wrong equipment at the end of lease. To avoid costs, remember to match the serial number on the equipment to that outlined on the lease schedule.
Some agreements with leasing companies can be confusing and vague.
To ensure you don’t experience any unpleasant surprises or unplanned fees ask for a fully transparent contract that addresses all topics covered off on the checklist provided.
Remember also to check whether your payments are in arrears or advance.
This article originally appeared in the June issue of IT Brief.