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IT Equipment Buy vs. Lease Decision

IT Equipment Buy vs. Lease Decision. Gary E. Carpenter, CPA Technology Assurance Committee Tuesday, December 3, 2002. A Little History. IBM’s Market 1952 Antitrust Lawsuit 1956 Consent Decree. 1956 Consent Decree. IBM must: Sell it’s equipment as well as rent or lease it.

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IT Equipment Buy vs. Lease Decision

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  1. IT EquipmentBuy vs. Lease Decision Gary E. Carpenter, CPA Technology Assurance Committee Tuesday, December 3, 2002

  2. A Little History IBM’s Market 1952 Antitrust Lawsuit 1956 Consent Decree

  3. 1956 Consent Decree • IBM must: • Sell it’s equipment as well as rent or lease it. • Offer maintenance to all users of IBM equipment. • Make parts and subassemblies available for sale. • Not restrict the buying and sell of used equipment. • Not purchase used equipment and send it to the scrap pile. • Not prohibit or control alteration to it’s equipment. • Set up a restricted “Service Bureau Corporation” to market computer services.

  4. Third Party Computer Industry • After the 1956 Consent Decree • New industry is born • Third Party Computer Companies • Third Party Engineering Companies • Refurb Companies

  5. What Should We Look At In The Buy vs. Lease Decision? • What are the numbers • What is the life of the asset • Corporate policies • Residual value • Upgrading • Technology • Cash and/or financing resources

  6. You Decide to Buy • How will you pay for the asset? • Identify the Economic and Corporate Life of the asset. • Plan on how you will dispose of the asset. • Plan your replacement/upgrade asset now.

  7. You Decide to LeaseNow What? • Work with a company you know and TRUST!!! • List what your needs are. • Do “what if” scenarios. • Have an exit plan at the end of the lease. • Beware of the low number.

  8. The Lease Ends,What do We do Now? • Know when the lease ends. • Make sure you know when the lease ends. • Then check again to see when the lease ends. • At least six months before the lease ends: • Decide if you want to keep the asset • Contact the lessor • Negotiate new contract or prepare to return the asset • If returning the asset what is your replacement plan

  9. We Made the Wrong Decision!! • If the asset was purchased: • What is wrong? • Technology • Asset • Impact on financial statements • Finances

  10. We Made the Wrong Decision!!(continued) • If the asset was leased: • What is wrong? • Technology • Asset • Impact on financial statements • Lease agreement • Residual value of the asset

  11. Gary E. Carpenter, CPA Carpenter Information Technologies, Inc. P.O. Box 15278 Syracuse, NY 13215-0278 315/487-4567 * Fax 315/487-2663 E-mail: gcarpenter-cit@worldnet.att.net

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