Lease or Purchase?

If it appreciates... Buy it.
If it depreciates... Lease it.
                                                     - J. Paul Getty

Why lease with TELEcomputers?

At TELEcomputers we lease network hardware systems.  But we will also lease software, web site design, hosting, database programming, network cable, telephony wiring and installation.  Since we do it all, from A to Z, we can combine it all into a simple "one-monthly payment" lease package.  Rarely will you find a company that will lease software, let alone all these other services as well. 

Why leasing?

For most businesses, the ability to use computer hardware, software, telephony and web services is far more important than the need to own them. With leasing you obtain the latest office tools that you need now and in the future, without straining your current budget or cash flow. Since the lease term can be spread over two or five years, the cost can be paid for as the items produce results.

What are the benefits of leasing?

Leasing offers the following benefits to you:

• Consolidation of Expenses: Include costs of consulting, hardware, wiring, programming, software, customization, data conversion, training and implementation within the lease. Bundling the individual components of a project in one lease is normally simpler and tends to level your expenses as you realize benefits  from the network equipment and internet services. 
• Conserve Cash Flow:  Leasing allows you to spread monthly payments over 2 or 5 years, rather than making a large lump-sum payment when you purchase.  Operating profits come from equipment use, not ownership. Leasing allows payments to be made from the revenues generated by the leased equipment. Therefore, equipment leasing helps retain your working capital for other costs of business (i.e., payroll, inventory, sales expansion or for profitable investment in new product development).
• Protect Bank Credit Lines: Leasing by-passes valuable credit lines which can be used for special, seasonal, or other income producing needs.
• Hedge Against Inflation: With no real capital investment you pay for today's equipment with tomorrow's cheaper dollars.
• Budget Adherence: Leasing helps to overcome budget restrictions and limitations. Acquisition of equipment may be justified by comparing a low monthly payment to lump-sum purchases, expenditures for outside services, savings in personnel costs or even higher revenue generated by the use of the equipment.
• Tax Benefit: Lease payments may be fully deductible operating expenses for tax purposes. (Consult your tax advisor.)

What are the different types of leases?

For most businesses, there are two types of leases to consider: 

1. Fair Market Value (FMV) Lease [Typically an Operating Lease]: The Fair Market Value (FMV) Lease is generally the most popular lease. A FMV Lease may be fully tax deductible (consult your tax advisor). It provides several options to customers at the end of the lease:

• Trade-up to a new lease

• Continue month-to-month leasing

• Return the equipment

• Re-lease the equipment at its fair rental value

• Purchase the equipment at fair market value

FMV is determined at lease expiration by recognized appraisers or similar experts in the specific equipment.

2. Capital Lease with $1 Purchase Option or a 10% PUT Payment: You have the advantages of leasing with the option to purchase the equipment at the end of the lease term for a predetermined amount, usually one dollar or 10% of the original cost of the equipment. In many cases, it eliminates uncertainty over what the Fair Market Value of the equipment may be at the end of the lease. Since the purchase price is predetermined, this lease type may not meet the requirements for tax deductibility as an Operating Lease. 

What is needed to obtain a lease?

Simply complete a lease application, which is very similar to a credit application.  (See the Lease Application section below.)  It asks for specific information about the business, like:

• Legal name of the business
• Type business (Corporation, partnership, proprietorship)
• State of incorporation
• Length of time in business
• Nature of business
• Principals information, i.e., name, home address, social security number.
• Bank reference
• Trade references
• Equipment supplier information and detailed equipment list

Once our leasing affiliate receives your application, they will contact your bank, trade references and independent credit bureaus to determine approval.  When the leased system is delivered and installed, you typically authorize the leasing company, in writing, to pay for it. Payments begin when you have accepted the equipment and services. Your initial payments are normally the first and last monthly lease payments.

How do I calculate the lease payment and the interest?

Lease Agreements usually call for a fixed payment amount for a fixed period of time. To simplify leasing payment calculation, please use our  lease payment calculator available on the "Lease Application" section provided below.  

Summary

In our experience, leasing is a win-win situation. You obtain the information systems that you need, when you need it, rather than having to wait until you have the capital to purchase. Your equipment is then able to assist you in making money, which offsets the cost of the lease.  

If there are any questions, please do not hesitate to contact us.

Lease Application

Please feel free to visit our lease affiliate Ryan Capital.  Their web site includes our online credit application, a quick rate calculator to give you a general idea of our lease rates* and information about our creative lease programs.  

Equipment Type:
Computer Equipment, Web Site Development, Software, Telecommunications Equipment, Printing Equipment, Income Producing Equipment

* lease rates fluctuate according to credit history and various other factors. Rates given are approximate values.