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Leasing vs. Buying

Leasing vs. Buying. Jason Marquardt American Capital Financial Services 630-512-0066 jmarquardt@americancapital1.com. John Vonder Providence Capital Network 800-680-0560 jvonder@ProvidenceCN.com. IASBO Annual Conference St. Charles, IL May 18, 2011. Overview. Introduction

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Leasing vs. Buying

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  1. Leasing vs. Buying Jason Marquardt American Capital Financial Services 630-512-0066 jmarquardt@americancapital1.com John Vonder Providence Capital Network 800-680-0560 jvonder@ProvidenceCN.com IASBO Annual Conference St. Charles, IL May 18, 2011

  2. Overview • Introduction • Leasing Basics • Leasing Benefits • Leasing Programs • Initial Steps • Lease vs. Buy Costs • Pitfalls to Avoid • Successful Programs

  3. Providence Capital Network, LLC • Experienced in supporting more than 100 Schools with: • Equipment Leasing • Computer Equipment • Software • Copiers • Security Systems • Telecommunications • Transportation • & More • End of Cycle Remarketing/Disposal • Laptops • Desktops • Monitors • Servers • Routers • Telecommunications • Member of IASBO and other ASBO organizations • Management experience serving on a school board

  4. American Capital Financial Services, Inc. • Independent Equipment Lessor for 100+ Illinois Schools • 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.

  5. What is a Lease? • 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.

  6. What can be Leased? • Computer Hardware • Software • Network Equipment • Printers & Copiers • Telephone Systems • Buses • And Much More!

  7. What are the Benefits? • 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

  8. What Types of Lease Programs are Available? Fair Market Value • Lowest Cost of Funds • Flexible end of lease options • Ideal in setting up an equipment replacement program $1 Purchase Option • Often a tax-exempt lease • Fixed ownership at the end of the lease • Ideal for infrastructure or software projects

  9. Why Pursue a Technology Refresh Program? • 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.

  10. Why Pursue a Technology Refresh Program? (continued) • 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.

  11. What Are TheInitial Steps? • 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.

  12. What Are TheInitial Steps? (continued) • 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.

  13. How Can It BeImplemented? • By School Location (per building) • By Grade Level • By Building Type (K-12 District’s) • By User (Students, Teachers, Administrators)

  14. How Can LeasingPlay a Role? • 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.

  15. Lease Payments ($32,000/year x 3) = $96,000 No out of warranty costs Easy to forecast Purchase Purchase = $100,000 Break/Fix costs Indirect costs for unreliable equipment (user frustration, downtime) Lease vs. Purchase ($100,000 of computers)

  16. What Are Some OfThe Pitfalls to Avoid? • 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.

  17. Successful Tech Rotation Programs • Refresh Lease • 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 • 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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