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Benefits of Leasing your computer equipment
Story On LeasingWhen Bill and Peggy Kensi took over Royal Laundry of Texas Inc. in 1996, the company was breaking even with sales of approximately $500,000. ..... Benefits of Leasing your computer equipment
You've completed a business needs analysis, weighed the alternatives, and selected your computer equipment for your operations. Now, consider your financing alternatives ; Leasing or out right purchase. Ask yourself a few questions about what the future might hold.
Is your need long-term or short-term?
If you're reasonably sure that the computer equipment technology solution you are choosing today will meet all your needs well into the future, the choice between leasing and purchasing may be a simple one. When equipment is most likely to meet long-term needs, purchasing is usually the most cost-effective acquisition choice.
But if you suspect that your IT needs could increase or change substantially within the next three to five years - not unusual given the pace of technology innovation, computer equipment leasing would be a smarter alternative for you.
You can acquire the systems you need today, use them cost-effectively until they no longer meet your needs, then easily upgrade or expand without worrying about what to do with your now under-powered systems. And if all your equipment still meets your needs? Exercise the purchase option available with every Sun Microsystems Finance.
Does your business depend on staying at the leading edge?
If information systems are critical to your organization's survival in an aggressive marketplace, only the latest, most sophisticated systems will help you keep your competitive advantage.
Because today's computer equipment vendor are working to bring you more powerful, more efficient, and more productive technology, the "leading edge" just does not stay put. Getting ahead today is no guarantee you'll be able to maintain that lead tomorrow.
Leasing your computer equipment will give your company an important advantage - access to the leading edge, no matter how fast it's moving. You can keep pace by simply leasing new computer equipment products as they're introduced. And since your lease can also include services, software and third-party technology, convenience is another a big plus.
Do you need financial flexibility?
Our Fair Market Value lease can provide for off-balance-sheet financing of equipment acquisitions, upgrades, and expansions, allowing you more control over your balance sheet position without tapping debt resources. You may be able to expense your monthly rental payments rather than depreciating the equipment cost, allowing you to order new equipment as you need it.*
Add to that the lower payments you'll be making compared to conventional financing and the elimination of a down payment, and your lease becomes an important financial management tool.
What does a lease vs. purchase analysis tell you?
A "lease vs. purchase" analysis compares the costs of leasing and purchasing your computer equipment based on the assumptions used for residual value, cost of funds, tax rates, and so on. The example below may help you develop your own analysis.
Assumptions
Cost of equipment $1,000,000
Depreciation Three-year MACRS equipment
Expected use Three years
Pretax Cost of Debt 6.5%
Lease Term 36 months
Monthly rent $26,980.00
Tax rate 35%
Model #1-based on cost of debt discount rate
Lease vs. Purchase Lease Purchase
Present Value (PV@ 6.5%)
Cost of Asset $885,058 $1,000,000
PC of Depreciation -------- ($ 841,977)
% Tax Rate x.35 x.35
Tax Shield ($309,770) ($ 294,692)
After-Tax PV Cost $575,287 $705,308
Difference in Cost(Purchase vs. Lease) $130,020
Break-even residual value analysis
Lease advantage in present value terms $130,020
Lease benefit future value (36 months @6.5%) $157,932
Future value residual Threshold $157,932.00 or 15.7% of the original equipment cost
The lease decision is neutral if you purchase the equipment at lease expiration for < $158,000. However, making that decision 3 years from now gives you the flexibility you need to manage your current budget and technology decisions much more effectively.
Leasing your computer equipment - Frees Money To Generate Earnings
Leasing conserves working capital for use where it will produce the best return in your business.
Saves Bank Credit Lines
Leasing permits the use of needed equipment while preserving bank credit lines for short term needs.
Provides Tax Advantages
Leasing provides a more rapid write-off because the lease term is shorter than the depreciable life of the equipment, and the monthly payments are often 100% tax deductible as a pre-tax business expense
Avoid Obsolete Technology & Equipment
When you lease technology or equipment you avoid the risk of being stuck with obsolete technology, since you may upgrade or add-on equipment as you see fit.
Avoid Ownership Risk
The value of technology and equipment is in its use…not in its ownership. Leasing places all of the risk of ownership with the Lessor, allowing you to upgrade or add new equipment as the need arises.
Simplifies Budgeting
Budget projections are simple because lease payments are known and fixed for the term of the lease.
Eases Budget/Administrative Restraints
When budgetary or administrative considerations prevent a capital outlay, the acquisition of equipment under a lease may be acceptable.
Improves Financial Ratios
When compared with ownership, leasing has a positive effect on financial ratios.
Increases Equipment Productivity
Leasing provides regular equipment replacement, thereby increasing productivity.
Equipment Leasing Book
There are many types of Leasing your computer equipment options available today. Please call our office or visit this link today for more Leasing your computer equipment options available to you.
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