The top 8 questions to ask when considering an IT lease

IT Leasing Technology Lifecycle

Navigating what can appear to be a minefield of IT leasing options isn’t always easy, but knowing the right questions to ask will help you make better decisions when it comes to choosing a leasing partner– based on overall value, not just cost alone. Asking the right questions when evaluating lease options can save you time and money in the long term.

Our top 8 questions to ask are:

1. How much will the capital cost and what is the interest rate? This will help you to see the bigger picture and evaluate exactly how much you are spending and enable you to make comparisons with alternative options.

2. Is there a residual value included in the lease and if so what is the amount? Knowing any residual value will enable you to validate the interest rate and assess if the assumed residual value is set at a realistic level.

3. What is the planned life for the assets? Agreeing from the outset how long you plan to keep your assets will help determine the correct lease term and establish whether you are likely to be paying any extension rentals.

4. What is your past history of refreshing your IT? When evaluating a lease, it is important to look at whether you have previously been able to return your assets or refresh them at the end of the primary lease period, or if you have extended the life of the assets for an additional period. Most organisations state that they will return their assets at the end of a lease but are generally only able to return up to 80% of assets at the end of the primary lease period. It is important to know this in order to make a proper full-life-cost evaluation.

5. Does your leasing provider give you a process and system to help you manage your assets and notify you when each asset has reached the end of its life? Without reliable systems and processes, it is difficult to determine realistic end-of-life dates for IT equipment. Integrating asset management into your lease agreement will enable you to track and monitor equipment and will help you manage the replacement of equipment. An integrated process and management tool can save you time and money and provide valuable information when it comes to end-of life disposal and replacement. It can also ensure assets with residual or re-sale values are found so that they can be sold or replaced in a timely manner.

6. What happens at the end of the life of the asset or the lease; do you have to pay any end-of-lease charges or costs? It is wise to have a frank discussion before you sign the lease agreement. You should have a clear view as to whether you want to return the assets at the end of the lease and whether the lease provider genuinely wants the assets back. Ask the lease provider to explain the basis on which they set residual values. Is it a portfolio approach, whereby they only expect a certain percentage to be returned, or do they set residual values based on the actual equipment’s likely future value. Do your objectives match your lessors?

7. How do you dispose of IT equipment and deal with data and environmental issues? Companies can find themselves in hot water if they don’t comply with environmental regulations when disposing of IT equipment. There are also legal implications around data security when disposing of old machines. A good IT leasing partner will be able to help with environmentally safe and secure disposal, which will save you time and protect your organisation from reputational or legal risks. The logistics and disposal should be at no cost to you.

8. If you keep the assets, what are the costs? If you do choose to keep the leased assets at the end of the agreed lease period, costs might include lease extension charges. Your leasing provider should tell you in advance what these charges would be. It is prudent to talk about this possibility at the outset – before you sign any agreements. As the saying goes, “forewarned is forearmed”. Only by considering the whole picture can you fully evaluate what is the best way to acquire your IT equipment. You can put yourself in the driving seat by asking the right questions.

Speak to one of our experts to learn more about our market-leading Technology Lifecycle Management solution.