We’ve all heard of car leases, but you might not know about IT hardware leases. But you should. Especially if your employees are stuck with Model T hardware you bought outright when they could be using a leased Tesla.
Few organizations take advantage of leases for their devices’ whole lifecycles. Servers, desktops, and tablets age quickly, and often there’s just not enough money in IT’s budget to replace them. Instead of leasing or replacing laptops with the newest processors and more storage, companies keep devices whose value declines every day as they grow frustratingly slow to work on.
For a company in this situation, leasing IT hardware might be a good option as it can establish a schedule for hardware replacement at a known cost. Plus, employees should benefit by working on modern devices with better processors and storage and that run the latest operating system.
Many organizations don’t take advantage of hardware leasing because it’s still a bit unknown to them. Others just need a refresher on how it all works – some may remember Xerox leasing its copy machines. Some may be thinking about leasing hardware, but have reservations about the process.
We rounded up the six questions we hear most often about leasing IT hardware, and provide below a clear view into how hardware leasing works and what you need to know before, during, and after a lease.
What IT devices can I lease?
Organizations can lease just about any piece of IT hardware, and about 20-40 percent of companies do. Generally speaking, the most common equipment leased is server and data center hardware, which includes the networking components (we’ll explain why below). Organizations also frequently lease notebooks and tablets, and to a lesser extent, desktops.
What’s the advantage of leasing? Why not just purchase a device and hold onto it?
The answer here is twofold: The newest tech usually leapfrogs the old after 18 months. To put it another way, a server that was leased in the fall of 2014 is outdated, and it’s probably cheaper to lease new equipment with better technology than to buy it outright. And while most employees can still work on a 2-year-old laptop, a slow server will hamstring every employee in the company.
Another advantage is that leasing terms can be written to sync with warranties, so old equipment can be easily replaced and new devices leased once the old warranty expires. When your laptop’s 3-year warranty is up, it’s often more beneficial to replace the laptop than purchase a new warranty for it, considering advancements in processors, storage capacity, and RAM.
What are my options at the end of a fair-market lease?
IT leases generally tend to be more flexible than your strict car lease. A car lease is defined by miles or months, but there are no such limits on a laptop or server.
Most IT leases run for three years and allow for flexibility. After the lease is up, the lessee can return the equipment, continue leasing it on a month-to-month basis, extend the lease, or purchase the equipment at a fair market value. These options are usually stipulated at the onset of the leasing contract, and they allow lessees to determine their own best course of action after the terms are up.
What happens to data and hard drives when you return devices to the lessor?
It all depends on what the lessee wants. Many organizations will use their own IT staff to wipe their hard drives, or redeploy the drives in their environment. But lessors can also wipe and destroy hard drives once devices are returned as part of a larger IT asset management program. In these cases, lessors can usually wipe and destroy the device on premises, and provide customers with a data destruction certification to verify that all data has been wiped clean.
Should I worry about damaged or lost products?
We’ve heard about a nasty trick pulled by some IT leasing companies – return it all or buy it all. In other words, if every laptop is not returned when a lease expires, the lessee is on the hook to purchase every single device. That’s unreasonable because devices often get damaged, lost, or taken by employees who move to other companies.
Your IT leasing partner should accept that some devices will be unaccounted for at the end of the lease, and an allowance that supports that assumption is usually built into the contract. For example, if an organization leases 1,000 laptops, the lessor will often create a pool of money that contributes to replacing the missing devices. Let’s say after three years, a laptop is worth about $150. If the lease terms include a $5,000 pool for replacement costs, the company’s 25 or 30 missing laptops won’t add up to a penalty or additional charge. This cushion tends to be a realistic option for both parties of the lease.
What do I do with the peripherals, like my mice and keyboards?
Usually, you can keep them. Again, the value of the hardware drops, and commodity peripherals tend to be worth very little after a few years because they’re easily replaced. Generally, most lessors do not want mice, keyboards, or wires returned after the lease expires.
Combating the “We just did this!” complaint
It’s easy to understand why floating the idea of leasing hardware might be a hard sell – but proposing the idea of another hardware refresh usually elicits the “We did just this!” remark from the C-suite and accounting. However, leasing equipment like servers and storage, tablets, and endpoint devices can keep your organization up to date on the newest technology that has already leapfrogged your old equipment.
Plus, it may be cheaper in the long run to lease equipment than to buy it outright (desktops, tablets, and notebooks are less than $1 per day) once productivity is weighed and the cost of repairing and maintaining old equipment is considered.
As you prep for your next hardware refresh, consider leasing the equipment, which can help you trim excess costs, reduce productivity losses, and improve the performance of your servers and laptops.
Contact your SHI account executive if you want to know more about SHI’s leasing and lease-end services.