Computer Leasing

Computer leasing is an attractive option for companies who would like to purchase new computers or replace the computers they already have.

There are two basic lease formats:

Finance leases are a lot like standard car loans. Payments (which include interest) are made in installments and the user becomes the owner at the end of the lease when the computers are paid in full. The ownership of the computers is transferred to the lessee at the end of the lease for either no charge or a nominal fee.

True leases resemble a car lease. The lessor owns the computers and leases them to the user. Over the full term of the lease, the lessee will usually repay 85% to 95% of the full purchase price of the equipment and there would be an optional buy out at the end of the lease. If the user doesn't wish to purchase the computers, ownership would remain with the lessor. The lessee may also renew the lease at that time, and the terms could change subject to whether the equipment is upgraded or not.

Most computer leases of less than three years are usually of the "true lease" type. More lengthy computer leases can be either "finance lease" or "true lease" types. Computer leases of 5 years or longer are most often finance leases. Computer technology is changing at such a rapid rate that after 5 years, the equipment may not have any residual value.

Time is money

Leasing can make a lot of sense, but it can also cost you a lot of dollars. The most attractive feature of leasing versus outright purchase is that by leasing, the company does not have to pay the full purchase price immediately. In addition, computers have a short technological lifespan compared to most office and factory equipment. It may be preferable for the company to have the ownership of the computers revert to the lessor instead of trying to sell them or trade them in on newer models when the time comes to replace them.

Continued...

By Steve Levenstein