IT leasing is on the rise, leaping 32% in June alone. Clearly many organisations are welcoming more flexible methods of financing their technology than the traditional bulk cash outlay on new equipment every few years.
What many businesses, schools, colleges, universities and public bodies don’t realise is that they can actually generate a significant cash injection when they sell their existing assets to a third party and lease them back for a low monthly rental. You don’t need to wait until you need new IT to benefit from leasing.
Sale and Leaseback
If you need a fast injection of cash into your organisation, you have a couple of options. You could secure a loan using your assets as collateral. This practice is on the rise, with asset-based finance rising by £370m over the past year.
Or you could sell your IT assets for a lump sum, then lease them back for monthly rental. Just like a loan you get a lump sum of money for your business and a new monthly outgoing, but rather than an interest payment it’s just a lease payment on the assets.
Unlike getting a loan against your assets, which may come with some constraints, the sale-and-leaseback approach doesn’t restrict how you spend the cash; you can do what you like with it – hire new staff, use it to develop your business in some way or just return it to your shareholders.
Another benefit is that you won’t need to train staff to use new equipment – they will keep the same IT they always had, the only thing that will change is the way you finance and manage the assets.
Why Lease?
In comparison to leasing, using valuable cash to purchase IT outright may not be the best way to budget your IT spend. A standard monthly rental is generally much easier to budget for than irregular, significant outlays of cash for new equipment, especially considering the standard recommendation is to replace hardware after 3-4 years.
All IT degrades over time, meaning its value decreases after purchase. User experience is also affected; as IT ages and starts to underperform, end user productivity goes down and maintenance costs go up. For schools this can have a detrimental impact on learning, and for businesses it can eat into billable hours and staff productivity. Leasing your IT equipment will give you a regular refresh cycle, which ensures your IT is always up to date.
IT leasing is becoming increasingly common as organisations realise the many benefits of having access to flexible finance. This trend reflects the wider move towards companies wishing to consume their technology ‘as a service’; that is to say, within a package alongside hassle-free management, to keep maintenance costs as low as possible.
