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The Advantages of Leasing
Cash Flow Savings
From a cash flow management standpoint, leasing can make a lot of sense. For example, instead of making a $100,000 upfront outlay for computer equipment, you can acquire the same equipment for $2500 per month through leasing. Thus, you save operating cash to use elsewhere in the business. Computer equipment is not an appreciating asset; its value declines rapidly over time. The smart play is to invest cash in things that appreciate and lease items that depreciate.
It is often easier to justify the acquisition of new technology when you compare the monthly lease expense to the current operating expense of the older equipment.
Off-Balance-Sheet Financing
From an accounting standpoint, lease payments can appear as a monthly operating expense rather than a purchase that must be capitalized and depreciated. Frequently, the book value of purchased assets is much greater than the market value. Thus, many companies must retain purchased equipment longer than its useful life inside the enterprise. Furthermore, operating leases don't count as debt on the balance sheet. Thus, leasing allows companies to keep their current bank lines untapped. Cash can be reinvested in other parts of the business where real value is produced.
Leasing will offer better financial ratios on key balance sheet calculations such as debt to equity, and return on assets.
Budgeting
Leasing allows companies to maintain level, predictable budgets for hardware, even when the need for computing power continually increases.
Cost per unit of performance for computing rapidly decreases over time while the need for computing power increases. Yet the availability of capital for equipment purchases often fluctuates.
Monthly lease payments allow a company to get more performance for the same monthly outlay. (Since the same dollar will often buy three times the performance over a period of three years, a client can frequently replace leased older equipment for the same monthly payment he was expending before.) For example, at the end of a three-year lease term, the same $ 3000 per month will probably obtain two to three times the performance of the 3-year old equipment. Budget approval for the new leased equipment is easier since the monthly budget remains unchanged.
Staying Current
Purchased equipment tends to stay in the enterprise for five years or longer, way past its useful life span. Leasing allows organizations to consistently upgrade their technology with minimum budget hassle.
Since Tiger can provide refurbished or new equipment (through our affiliation with our IBM/HP/Sun/Cisco Business Partners) we can objectively analyze your computing requirements and select the best combination of new and/or used equipment to meet your specific needs. Many of our competitors offer only new or only refurbished equipment, we can provide both, based on the needs of the customer. This independence means we will tailor the most cost effective solution for the need.
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