Computer Hardware Leasing Explained

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Because most Canadian business owners and financial managers are not tech-savvy they are often intimidated and confused by computer leasing companies and computer hardware leasing. We also are always amazed when clients don’t know that computer software can be financed also - not everyone knows or tells you that. If a certain computer leasing company does not by policy finance software, guess what, you have other financing options for that part of your purchase.

You have made the decision to lease of finance your technology, which might include hardware, software, telecom equipment, routers, etc.! One of the key drivers in your decision is of course always the tremendous cost of capital equipment acquisition in technology. And it’s not as if that’s an appreciating asset on your books. Have you checked out computer and technology prices - performance goes up and new models come out every year, and the price comes down. Other than the absolute cost, that is, of course, good news.

What most lease companies don’t tell you is that you have a number of key decisions to make when you lease technology, and their firm might not necessarily be the best one to finance your purchase. Why is that? Simply because financing companies are not technology companies, they are driven by pure return on invested capital. They make money via the actual interest rate on the transaction, as well as the sale of your computers at the end of the lease if you have entered into a fair market lease. (More about fair market leases later).

Other ways in which the lease company makes money off your firm is the ability to lock you into a relationship whereby you become a repeat annuity customer for additional technology financing. Other subtle and minor profit generators for lease firms that you might not know about are:

Let’s move on to major secret # 2 that your computer lease company might not tell you about. That issue is based around the concept that you want to use technology, not own it (Why would you want to own a depreciating and obsolescing asset?). The solution that drives and solves that problem is the previously mentioned fair market lease, otherwise known as an operating lease. That more often than not, for a significant computer lease financing is the best solution for your leasing needs in technology. But guess what? We feel that probably 90% of firms don’t offer that solution because it involves being a specialist in asset and residual values. Finance lease companies tend not to know too much about the bits and bytes.

Therefore you should ensure that you have options in your lease proposal that identify whether you can finance on an operating lease basis also. It might not necessarily make sense for a small purchase, but a larger acquisition should consider this strategy.

Another significant benefit of leasing, in general, applies to computer leasing, which is that miscellaneous add-ons can be financed - they include shipment, install, warranty, etc. Not every firm allows you to finance these, most will. And, as we mentioned, don’t forget, Software can be financed!

Investigate carefully the financing of technology - these assets are expensive, depreciate, and you do not want to make an improper financing decision for technology that is driving your accounting, sales and customer relationship data.

' Canadian Business Financing With The Intelligent Use Of Experience '

Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil

Computer Leasing Companies Computer Hardware 7 Park Avenue Financial