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PC Purchases - lease or buy?

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I am CFO for a small, <50 employee company.  We will need to obtain desktop PC's soon for our call center employees.  Any thoughts on which route may be best: lease or buy?
Thanks for your comments!

Answers

Bryan Frey
Title: VP Finance/Corp Controller
Company:
(VP Finance/Corp Controller, ) |

Lease vs. buy is a classic, but less so in the world of computers these days. A call center PC has such basic needs that you can find a desktop for $250 that will do the job and that is below most company's capitalization threshholds. This tells you that it's not worth their time to track and manage accounting records on these computers. When it comes to lease vs. buy in low value high volume items I find that this applies: not worth the time and effor to track and manage the lease docs on something so darn cheap. The fees alone will be a significant part of the value of the very PC you are financing, and given the cost of capital these days for most borrowers, you will find that the lessors profit margin will be very high relative to your cost of money. Of course that's just my $.02.

Steve Breitman
Title: President/CEO
Company: Mindful Business Solutions
(President/CEO, Mindful Business Solutions) |

One of the main reasons for leasing equipment instead of buying it is cash flow. Computers can be inexpensive, but when you add in the cost of a monitor and when you buy many units, the purchase price can quickly escalate. Depending upon your cash position and your revenue situation, you may be better off making a low monthly payment than paying cash. Sure the interest rate may be unattractive, but is a small price to pay to keep the business in a good cash position.

Danny Dohrmann
Title: Interim CTO / Trainer
Company: ADC,i
(Interim CTO / Trainer, ADC,i) |

You may also want to look at (x)-as-a-Service. (x)aaS in your case will be contingent on what your expectations are. If I can be of any service, please let me know.

Alexander Haislip
Title: Author
Company: Independent
(Author, Independent) |

I worked at a big company that leased computers for its global workforce. The lease came with a service contract. So far so good, right? When something breaks, you'd like it fixed.

I dropped my company-issued Dell while I was at the airport and the monitor became unhinged. As I was wiggling it back on, I observed that several of the key screws were stripped and not properly functioning. The dell was three years old at that point.

The machine was at the end of its natural life, yet under the terms of the lease agreement, the service provider was required not to replace it (the smart option) but to repair it.

So a computer repairman came to my company's offices, saw what the problem was and ordered the necessary parts from Dell. Then he came back two weeks later to install them. This was a professional technician that the leaser had contracted with to deliver on their service contract. I'm thinking he was $75 per hour for five hours plus the cost of the replacement parts, etc...

Long story short, it would have been easier to replace the machine than to fix it, but my company ended up spending a lot more on it thanks to the restrictive nature of its lease agreement.

Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

If the arrangement is strictly a lease and not a lease with replacement arrangement [with a vendor], it is essentially a financing arrangement, cash flow is your critical consideration, and you may prefer to lease to reduce "fronting" cash. If the transaction is with the computer manufactdurer you may also receiveinstallation, support, upgreades, or other services, in which case a lease retains your financial influnce on service levels in addition to cash flow advantages. Be wary of emerging accounting princiles expected to require capitalized asset account for all leased asset transactions. If you have existing debt, leasing may offer easier covenant conformance.

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