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Lease Myth Busting – Myth #13 – Leasing is an essential of a technology refresh program

This myth is fascinating because – except in unusual circumstances – it is the exact opposite of the truth. Nothing about owning equipment restricts a company from running a refresh program. An equipment user and owner can upgrade or refresh equipment at any point in time. Lessees are required to upgrade or refresh at the end of lease or make additional payments.

When looking at a lease decision, with respect to a refresh program, it is important to remember one important guiding principal:  leverage in refreshing technology is with the owner of the equipment.  If the equipment is leased and the lessee needs more time to make a refresh decision, leasing works against them – and becomes more costly – because more time to consider a decision usually means more extension payments for the lessor or vendor. The lease term is arbitrary – the lease time line may or may not match the optimal moment for refreshing technology.  In contrast, if the technology user is also the owner the user/owner can control the time frame for refresh and can drive a harder bargain with the vendor. The user/owner can pass on any deal offered by a vendor.  The user/owner can wait without incurring monthly lease costs – which can be an important option if the technology may change or the deal may get better in the future. Leasing restricts the lessee’s options in the upgrade transaction.

Conclusion: Refresh and leasing are not joined at the hip. The buy or lease to own option is an equally valid approach to financing a refresh program due to greater flexibility and potentially lower all-in cost.