Leasing IT equipment - worth it or not
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I'll get this ball started with an opening post.. but really need Matt's and Scott's posts to start the discussion.
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Well the one really big aspect that I often bring up is the "time value of money." Money today is worth more than money tomorrow. So all other things being equal (like the price) paying less up front is better for you financially than paying completely up front. Leasing is never this simple, but the TVoM must always be considered because, in theory, if you lease a $3,000 device over three years paying monthly you have quite a chunk of money to invest in your business for quite a long time.
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Points for:
- Easy equal payments
- Possible tax benefits (at least in Canada)
- Finance has a predictable monthly cash flow
- No huge one time capital outlay to save / borrow for
- Get $1 buy out for infrastructure (servers / networking)
- Get full value buy outs for desktops / laptops / disposable stuff and send it back to them (saving you recycling / disposal fees)
- .... as I think of them I'll add to it
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Another big component that the financial department likes predictability and leasing makes IT spending far more predictable.
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@MattSpeller said:
- Get $1 buy out for infrastructure (servers / networking)
That's not a specific leasing thing and certainly not always included. Leasing can go to a set term, have a buy out, be indefinite, etc. Lots of ways that that can go.
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And if I worked for any other company - that might be the case, but here it's not. A single one time and then forget about it is the mentality I deal with.
I'm not sure if that means that we are always struggling to make ends meet, or someone just looks at things from a perspective that just isn't compatible with the reality of how our business runs (or should run).
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Points against
- More expensive over the term
- Business is "less agile" as you're tied into a deal for the gear
- If you chose poorly and have to buy out gear at "fair market value" prepare for pain
- Planning EOL for gear becomes critical (don't forget to nuke it all!)
- .... more as I think of them
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@MattSpeller said:
- More expensive over the term
Not necessarily true. Generally true, but not always.
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@scottalanmiller said:
That's not a specific leasing thing and certainly not always included. Leasing can go to a set term, have a buy out, be indefinite, etc. Lots of ways that that can go.
There are many options and you should investigate them all! I mention it as what worked exceptionally well for me in the past.
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@scottalanmiller said:
Another big component that the financial department likes predictability and leasing makes IT spending far more predictable.
This was huge for my situation. Allowed me to spend ~30% more on gear than just one huge cap-ex hit
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@MattSpeller said:
- Get full value buy outs for desktops / laptops / disposable stuff and send it back to them (saving you recycling / disposal fees)
This is one I have a hard time with. You lease equipment for 3 years. You receive equipment, if you're lucky you can deploy it all on day one.. but when the lease is up, you have to start that transition normally at least 2 months before it expires to make sure you send it back on time.
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@Dashrender said:
And if I worked for any other company - that might be the case, but here it's not. A single one time and then forget about it is the mentality I deal with.
I'm not sure if that means that we are always struggling to make ends meet, or someone just looks at things from a perspective that just isn't compatible with the reality of how our business runs (or should run).
It will really depend on your business environment.
I had the finance dept very nervous of huge cash outlays because reasons I didn't care about. They suggested leasing to me and the more research I did the better it looked. Prevented the huge cash haemorrhage that finance dreaded and everyone won.
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@Dashrender said:
This is one I have a hard time with. You lease equipment for 3 years. You receive equipment, if you're lucky you can deploy it all on day one.. but when the lease is up, you have to start that transition normally at least 2 months before it expires to make sure you send it back on time.
Ahhh you need the special sauce
You lease 1/3 of your equipment every year. Prevents epic brown pants month(s) trying to deploy a whole company's worth of stuff.
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@Dashrender said:
@MattSpeller said:
- Get full value buy outs for desktops / laptops / disposable stuff and send it back to them (saving you recycling / disposal fees)
This is one I have a hard time with. You lease equipment for 3 years. You receive equipment, if you're lucky you can deploy it all on day one.. but when the lease is up, you have to start that transition normally at least 2 months before it expires to make sure you send it back on time.
So lease for five years or ten years. Other than forcing you to improve planning it should not be too big of a hit.
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@MattSpeller said:
@Dashrender said:
This is one I have a hard time with. You lease equipment for 3 years. You receive equipment, if you're lucky you can deploy it all on day one.. but when the lease is up, you have to start that transition normally at least 2 months before it expires to make sure you send it back on time.
Ahhh you need the special sauce
You lease 1/3 of your equipment every year. Prevents epic brown pants month(s) trying to deploy a whole company's worth of stuff.
That too. Your entire shop should not be leased as a single, enormous entity all at once, most likely.
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@scottalanmiller said:
That too. Your entire shop should not be leased as a single, enormous entity all at once, most likely.
Good lord, I'd die if that was the case. Doing 1/3 usually took a month or three. No real rush as I got Dell to stagger the deliveries so I didn't have a ton of boxes (and pressure) from everyone.
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So I've been involved on the leasing end of the firm that leases out gear and there are lease types that don't have these problems. Month to month forever leases, as an example, was nearly all that we did. Customers had to commit to say three month minimums on gear and after that it was month to month. They could lease for as long as they wanted. The cost even decreased (very slowly) over time. There was never a time that they were without support and never a panic to replace the gear. Also, no $1 buy out options or anything like that.
So effectively nothing like the assumptions that are often associated with leases. Customers loved it because their costs become completely predictable and their agility went up, not down.
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A great example we've been through a single iteration with is our mopier. We purchased one in 2008, We replaced it in 2013. We only replaced it because the old machine was pretty much horrible since day one, and near replacement time administrator was just becoming fed up with the problems.
We have a tendency to run equipment into the ground here. That said - Scott seems to be of that idea as well. For example, I recently had a post here talking about replacing my now 8 year old WiFi system. Scott and many others chimed in and said - be prepared to replace but don't until it fails.
This type of thinking kind of flies in the face of leasing unless you expect the life of the equipment is roughly the same as the life of the equipment.
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What is a mopier?
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@MattSpeller said:
@Dashrender said:
And if I worked for any other company - that might be the case, but here it's not. A single one time and then forget about it is the mentality I deal with.
I'm not sure if that means that we are always struggling to make ends meet, or someone just looks at things from a perspective that just isn't compatible with the reality of how our business runs (or should run).
It will really depend on your business environment.
I had the finance dept very nervous of huge cash outlays because reasons I didn't care about. They suggested leasing to me and the more research I did the better it looked. Prevented the huge cash haemorrhage that finance dreaded and everyone won.
In a similar situation, management would rather take a loan than a lease, in my case.
