Leasing technology such as computers, laptops, and mobile phones is a common practice for many companies. It allows businesses to access the latest technology without having to purchase it outright, and it can also be a cost-effective way to manage IT budgets. In this blog, we will discuss how the leasing process works when leasing technology from a specialist leasing company.
Step 1: Research and Preparation
The first step in the leasing process is to do your research and preparation. Determine the technology needs of your company, including the type of equipment required and the number of devices needed. Research the leasing companies available and compare the terms and conditions they offer. Factors to consider include, the length of the lease, the monthly payments, any upfront costs, end of term disposal options and any restrictions on the use of the technology.
Step 2: Negotiating and Signing the Lease Agreement
Once you have decided on the leasing company and the technology you need, the next step is to negotiate the lease agreement. This is where you will discuss the terms and conditions of the lease. It is important to read the lease agreement carefully and ask questions if there is anything you do not understand. This is a legally binding document that sets out the terms and conditions of the lease, so it is important to read it carefully before signing.
Step 3: Delivery and Acceptance of the Technology
Once the technology has been delivered it is important to inspect it to ensure that it is in good condition. Check for any damage or defects that may affect the performance of the equipment before you distribute it to your staff, especially if they are based across multiple locations, as it can be difficult to get everything back in a timely manner, if needed.
Step 4: Making Monthly/Quarterly Payments
After signing the lease agreement, you will be required to make monthly/quarterly payments to the leasing company for the duration of the lease term. These payments are fixed and include the cost of using the technology as well as any interest, taxes or fees. Payment terms are generally monthly or quarterly but can even be annually.
Step 5: Returning or Upgrading the Technology
At the end of the lease term, you will have the option to return the technology to the leasing company, buy the technology outright, or upgrade to the latest equipment. If you choose to return the technology, the leasing company will inspect the equipment to ensure it is in good condition. If any damage is found, you may be responsible for repair costs. If you choose to upgrade, the leasing company will provide you with options for the latest technology available.
If the equipment is not returned, you will need to continue paying, but you can also use this opportunity to renegotiate the lease contract if you believe you will need the equipment for some time longer.
Key Terms to Know
Here are some key terms you should be familiar with when leasing technology for your company:
- Lease Term - The lease term is the length of time that you will be leasing the technology. Typically, leases for technology equipment can range from one to four years, although the term can vary depending on the type of equipment and the leasing company's policies.
- Residual Value - The residual value is the estimated value of the technology at the end of the lease term, after accounting for normal wear and tear. This is the amount that the leasing company expects the equipment to be worth once the lease term has ended. The residual value is an important factor in determining the monthly payment amount and can impact the final cost of the lease.
- Residual Investment - A residual investment is an amount of money that a leasing company invests in a leased asset that is expected to have some residual value at the end of the lease term. The leasing company is taking a risk by making an investment in the leased asset with the expectation that it will retain some value at the end of the lease term. The purpose of making a residual investment is to reduce the monthly payments that the lessee needs to make over the course of the lease term, often making leasing cheaper than buying upfront.
- Payment Terms - The payment terms are the fixed payments that you will be required to make to the leasing company each month or quarter. These payments will cover the cost of using the technology, as well as any applicable interest, taxes or fees. The amount of the monthly/quarterly payment will be determined by several factors, including the cost of the equipment, the lease term, and the leasing company’s own invested amount in the purchase cost.
- End of Term Options - These can vary depending on the leasing company and may include the ability to upgrade to the latest technology at the end of the lease term, extend the lease term, or purchase the equipment outright. It is important to review the lease agreement carefully to understand what end-of-term options are available and to factor them into your budgeting.
- Fair Market Value (FMV) - The FMV is the estimated value of the technology that could be obtained today for the equipment’s current condition. You may have the option to purchase the equipment for its FMV at the end of the lease term.
Understanding these key leasing terms can help you make an informed decision when leasing technology for your company. It is important to carefully review the lease agreement and to ask questions if there is anything that you do not understand. With the right leasing agreement in place, you can access the latest technology for your business while managing your IT budget effectively.
Is Leasing Right for Your Business?
Deciding whether to lease or buy can be a complex process. At Quadrent, we have a long history of simplifying the complex leasing world.
To help you discover how leasing works and figure out if leasing is the correct choice for your business, we’ve created an ebook with everything you need to navigate the leasing world. The ebook includes a detailed comparison of the benefits of leasing versus buying and more information on your leasing options. Download the ebook to learn more.
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