Hello Joseph,
I have had experienced with Firms (From the Accounting/Management side) in Firms who purchase computers and lease or buy/leaseback.
The obvious advantage of purchasing equipment is that you own it and can use it well beyond its useful life. However, when you keep equipment too long, you may need to make large unplanned purchases if the older equipment fail unexpectedly. Does your Company the funds or access to capital when this happen?
The advantage of leasing is managing cash flow since you are simply paying rent and this may qualify as off balance sheet financing (Debt is not recorded on the balance sheet). If your Company's Debt is not a concern with your bank, I suggest looking at an Equipment Loan.
My experience with Larger Firms (over $200 million in Revenue) who lease Computers on a 3-4 year cycle is there will be a minimum 4-6 months overlap on when a new lease start and the old one end because you cannot leave your employees without a Computer. Internally, you will need 2-3 months on each end of the lease to get the computers setup and distributer on the front end and cleaned out and returned to the Leasing Company on the back end. Also, remember if you lease 50 computers, you need to return 50 computers in working condition. Ask yourself, How good is your asset tracking and systems (employees) to do this? Many IT departments will also cannibalize a non-working computer to fix other computers so you may be short when returning equipment.
In many instances, we would buy out the lease at the end because we are unable to retrieve all the Computers or the IT dept. did not have time to clean out the Computers before returning. The Leasing Company usually prefer the buyout because they do not want to deal with old equipment.
My suggestion is to only lease on a regular cycle if your Company have very strong Internal Policies and procedures in addition to a robust IT department.
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Sam Lee
Controller
Architectural Resources Group
San Francisco CA
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Original Message:
Sent: 09-20-2019 08:17
From: Joseph Harper
Subject: Debate, leasing computers vs buying computers
We are having an internal discussion on leasing computers, turning them every three or so years, vs buying.
We have internal folks who have IT duties and experience, as well as partnering with a local, outsourced IT company for higher level work.
I would love to get thoughts from the Connection Cafe on lease vs buy.
We are a mid-sized construction company.
We believe we can beat leasing by purchasing a limited selection of computer hardware - the Dell vs HP choice, and using them for longer than three years. Not all users have the same need for processing power. We can rotate the computer stock through a smart retirement/replacement plan, achieving a longer use of the asset, and in the end, save money over a leasing program.
Overall, hard dollar savings are hard to overcome in this discussion.
Again, thoughts?
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Joseph Harper CPA, CCIFP
CFO
Greater Dayton Construction Group
Beavercreek OH
(740) 607-1449
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