Leasing vs. Buying

Report
Leasing vs. Buying
Jason Marquardt
American Capital Financial Services
630-512-0066
[email protected]
John Vonder
Providence Capital Network
800-680-0560
[email protected]
IASBO Annual Conference
St. Charles, IL
May 18, 2011
Overview
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Introduction
Leasing Basics
Leasing Benefits
Leasing Programs
Initial Steps
Lease vs. Buy Costs
Pitfalls to Avoid
Successful Programs
Providence Capital Network, LLC
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Experienced in supporting more than 100 Schools with:
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Equipment Leasing
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End of Cycle Remarketing/Disposal
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Computer Equipment
Software
Copiers
Security Systems
Telecommunications
Transportation
& More
Laptops
Desktops
Monitors
Servers
Routers
Telecommunications
Member of IASBO and other ASBO organizations
Management experience serving on a school board
American Capital Financial
Services, Inc.
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Independent Equipment Lessor for 100+ Illinois Schools
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Laptops, Desktops and Servers
Monitors
Printers and Copiers
Athletic Equipment
Phone Systems
Buses and Vehicles
And Much More
Member of Illinois ASBO since 2002.
Frequent contributor to IASBO Quarterly Newsletter
Headquartered in Lisle, Illinois.
What is a Lease?
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By definition, a lease is a contract by which one
acquires equipment for a specified period of time for
a specified rent paid to the lessor.
For Schools, a lease is a way to acquire and/or
finance equipment without voter approval.
Leasing does not constitute public debt.
Typically smaller fees and easier to facilitate in
comparison to debt certificates and bonds.
What can be Leased?
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Computer Hardware
Software
Network Equipment
Printers & Copiers
Telephone Systems
Buses
And Much More!
What are the Benefits?
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Conservation of Capital (100% Financing)
Consistent Budget
Avoid Technology Obsolescence
– Minimizes break/fix time
– Reduces user/teacher frustration
Lowest Cost of Funds
Disposal issues eliminated
Asset Management/Tracking
What Types of Lease Programs
are Available?
Fair Market Value
$1 Purchase Option
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Lowest Cost of Funds
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Often a tax-exempt lease
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Flexible end of lease options
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Ideal in setting up an
equipment replacement
program
Fixed ownership at the end
of the lease
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Ideal for infrastructure or
software projects
Why Pursue a Technology Refresh
Program?
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To advance technology within the classroom.
To reduce technology costs within the district
(warranty issues).
To eliminate headaches associated with a
mix/match of equipment (O/S issues).
To support the educational needs now and in
the future.
Why Pursue a Technology Refresh
Program? (continued)
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State driven mandates for compliance.
Eliminate disposal costs and headaches.
“Going Green” initiatives (energy costs).
Stay current with software licensing and
other total cost of ownership costs.
What Are The
Initial Steps?
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Get a detailed count of your current environment (#
of machines, location, age, etc).
Figure the future needs of the district
(increase/decrease of users, types of usage,
programs, etc.).
Determine what a reasonable annual deployment
schedule could look like.
Investigate financial budget implications & options.
What Are The
Initial Steps? (continued)
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Discuss the concept with the District Administration
team and Board of Education.
Discuss the concept with vendors (equipment
suppliers, leasing partners, etc.).
Select partners.
Determine deployment goals with IT staff.
Kick off the program.
How Can It Be
Implemented?
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By School Location (per building)
By Grade Level
By Building Type (K-12 District’s)
By User (Students, Teachers, Administrators)
How Can Leasing
Play a Role?
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Reduce the financial cost of technology within the
District. (0% or below)
Create a balanced budget, with even annual
expenditures.
Implement large projects at once without staging
over many years.
Avoid equipment obsolescence.
Eliminate the disposal costs and headaches
associated with refresh.
Lease vs. Purchase
($100,000 of computers)
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Lease
Payments
($32,000/year x 3) =
$96,000
No out of warranty
costs
Easy to forecast
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Purchase
Purchase = $100,000
Break/Fix costs
Indirect costs for
unreliable equipment
(user frustration,
downtime)
What Are Some Of
The Pitfalls to Avoid?
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Unequal Distribution of Resources (jealousy
amongst users).
Lack of Administration Commitment.
Re-alignment of Financial Resources.
Different equipment models, operating systems.
Selecting equipment that doesn’t match your
rotation.
Successful Tech Rotation Programs
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Refresh Lease
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3 or 4 year terms
Leasing company owns the equipment
Leasing company is responsible for disposal/liquidation
Total payments are less than the cost of the equipment
Capital Lease with Remarketing in the Future
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3, 4, or 5 year terms
School owns the equipment
Leasing company liquidates what you don’t want to keep and returns significant
revenue back to the school

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