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New accounting standards change the rules of IT leasing

Stephanie Overby | Jan. 3, 2017
New reporting rules could make IT equipment leasing less attractive, but lessors may be more amenable to meet client demands or offer new value-added services to win over customers.

At one end of the spectrum are lessors that produce profits through the re-sale of the returned equipment; at the other are those that make their margins through onerous contract terms that reduce the financial or technology currency benefits that leasing can provide.”

Smart IT leaders will develop a rigorous business assessment of the benefits of buying vs. leasing in the current environment before making a decision as a start. “To avoid the risks and pitfalls associated with leasing, customers must be prepared to invest in the internal resources required to track assets,” advises Kirz. “In addition, we recommend customers use RFIs and RFPs with a focus on flexible contract terms, elimination of onerous terms, and the inclusion of value-added services in order to differentiate one group of lessors from the other.”

IT leasing red flags

IT leaders should steer clear of these contract terms when leasing technology equipment.

  1. Pro-rated charges applying to all equipment from installation of last equipment to start of lease term.
  2. Interim rent charged against all equipment based on final installation.
  3. Excess penalties and charges for early termination of lease.
  4. Requirement for equipment to be insured and threat of automatic insurance provision triggered.
  5. Penalty provision for lease termination due to casualty or loss.
  6. Charges for all document and filing fees.
  7. Shipping charges to multiple destinations.
  8. Like-kind returns not specified or excluded.
  9. Any terms specifying a residual value guarantee or “remarketing fee.”

Source: Pace Harmon

 

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