Is Leasing Really Worth It?

llamaluvr asks: "As I understand it, there are some financial benefits for businesses leasing hardware equipment. Does anybody know what exactly those are, and how much they really help? Do they really outweigh the additional costs of replacing, repackaging, and returning old hardware? How do the size of the business and the computing environment affect these benefits? Additionally, what is the best balance between leasing and purchasing equipment -- would leasing desktops and laptops, but purchasing monitors be best, or should one just lease everything?" "A little bit of background: I work in the IT Operations department for a BU of a Fortune 100 company, and we lease practically everything right now. We have 4 full-time employees for about 800 workstations, and, while we seem to have enough manpower for managing projects and tickets, we have a tough time getting to returning the equipment, so a lot of it is already late. Complicating this is that many of these PCs are in a harsh industrial environment, and often have at least one failing part, which then costs us a fraction of the entire workstation (for example: a busted floppy might cost us $150 or more, unless we test the PC and replace the part, of course). Corporate has been more attentive to this drain on our time and money lately, and they have talked of outsourcing this process, but in the meantime, we're stuck with it. BTW, we lease IBM equipment through ePlus."

Comments

Wrong question to the wrong audience

[CaptainZapp]

Mate, your question makes about as much sense as asking "How long is a piece of string?".

For starters: I assume that you're in the US, but could imagine that some of the tax laws, which apart from keeping your liquidity fluid, but for a price, is about the only fathomable reason why you would want to lease in the first place, differ from state to state.

If it's a matter of keeping your gear in top notch condition and fixed 30 minutes after failure you might be better advised with a support contract including a service level agreement.

Cutting to the cheese: You are better advised to ask your CPA, or if you insist on getting fancy, your tax attourney.

HTH, HAND, etc...

Too Many Factors

[American AC in Paris]

Dear Slashdot,

As I understand it, sin(x) can have values between positive 1 and negative 1. Is my x going to be positive or negative?

A little bit of background: I have a value of x somewhere between 0 and pi.

Snark aside, this really isn't an issue where you should be guided by ancedotal evidence posted to Slashdot. You're working for a Fortune 100 company, for crying out loud--you need a carefully-planned methodology, not a bunch of yammering 'experts' giving you off-the-cuff advice on a very complex problem...

Leasing vs. Purchasing, short version

[192939495969798999]

If you lease, you pay less now. If you purchase, you potentially pay less later. However, there are complications on your taxes for either (depreciation vs. amortization, lease payment costs, etc.) In General, I would expect purchasing to be a better deal unless you are expecting to have high turnover of machines and volatility of business (i.e. contract job only requiring machines for 12 months = definitely lease!)

Talk to the accountants and lawyers

[anomaly]

This idea made no sense to me back in the days when I worked for a 'Big Six' accounting firm - you know, when dinosaurs roamed the earth?

However, at the time, this organization was legally a limited liability partnership. As such, any assets were problematic for a couple of reasons.
1. Capital expenditures must be depreciated over a multiple year cycle - you may pay $10K for that box, but you have to treat the box as if it's worth $10K this year, $6K next year, $3K the next, etc. We all know that computers depreciate more rapidly than cars, and there's no way that you could recoup 60% of the purchase price 12 months after purchase of a box. Expenses, however, are written off as they happen. Spend $10K on a lease this year, and you write off $10K THIS year.

2. You also show no value for that asset because it's not yours. This matters when the partners are concerned that a lawsuit loss might cause assets to be liquidated and LLCs like to have as few assets as possible. The less there is, the less that can be taken - or so the thinking goes.

So, it may cost more actual dollars the way you're doing it, but I bet that the accountants and lawyers have it figured out so that it's really in the best interest of your organization to 'waste' that money.

Hope this helps!

Regards,
Anomaly

Re:it's all in the taxes

[SunFan]

This is essentially an apparently legal scam to allow you to write it all off.

When it comes to reducing taxes, nothing is a scam if it is legal. Paying the lowest tax allowable by law is every citizen's duty to their country.