Why lease IT products?
Technology is evolving at an ever accelerating rate, and financially astute businesses are increasingly looking for alternative solutions to the traditional, capital acquisition of products which rapidly depreciate in value and are in many cases likely to have been superseded or become obsolete within 3-5 years. Leasing offers an attractive solution to hardware and/or software purchases with a number of key benefits:
- Ability to have the best product available, now – the cheapest option is often not the best solution for a business long term. Leasing allows the most productive solution to be implemented at a manageable cost.
- Benefits to cash flow – many companies do not have spare cash to invest. Leasing allows a company to invest in capital equipment and generate the additional business profits from the investment at a fraction of the initial cash outflow.
- Alternative funding source – Leasing protects other lines of credit such as overdrafts, and business loans which should be kept for non-asset based investments such as stock, staff, advertising, and marketing. This preservation of capital allows a business to respond to unforeseen circumstances and react to competitive pressures.
- Payments are 100% tax deductible – If a business pays cash the goods become an asset of that business and depreciation tax must be paid. With a lease agreement the rentals are classed as an expense of the business and are therefore 100% tax deductible against taxable profit.
- Leasing payments are fixed payments – irrespective of fluctuations in bank base rates. This protects a business against any future interest rises and allows them to plan their spending budgets accurately.
- Technology Refresh – All of our Finance’s rental agreements include our Technology Refresh Option. This helps protect against obsolescance by allowing the customer to upgrade IT equipment/software towards the end of it’s useful life. An example of the percentage spend available is Illustrated below: -
- Convenience – financing through an IT provider offers a “one stop shop” benefit as you don’t have to hunt around for finance. Banks/funders have widely varying underwriting criteria and if a business is turned down for finance with one bank they are likely to try only a small handful of others before giving up – which in turn can have a negative effect on the purchase. Also, each time finance is applied for a credit check is necessary, with an accrued number of these searches being potentially detrimental to the company’s future credit rating. By seeking appropriate finance solutions through the specialist IT leasing companies, a business gains the best possible chance of an acceptance, as along with it’s own lending book our finance partner has direct access to over 21 IT friendly banks and mainline funders. These funders will also accept the same copy of the original searches thereby protecting the customer from the afore mentioned problems.
Frequently Asked Questions - Why Should I rent and not pay cash?
Remember the saying: finance a depreciating asset, pay cash for an appreciating asset.
If you pay cash the goods become an asset of the business and you must pay depreciation tax on this, when you lease the rentals become an expense of the business and are therefore tax deductible against your taxable profit. A rental will also aid cash flow, with no large upfront investment to make you can put your capital resources to better use elsewhere in your business. - Can I pay the agreement early?
Yes, if you pay the agreement early you get a discount of up to 2% for each full years payments owed. - Can I upgrade during my agreement?
Yes, you can use our Technology Refresh Facility; this credits your agreement after each payment. If you use the full credit available your payments will remain the same, if you use more or less then the rental will be adjusted accordingly. - Will I own the equipment at the end of the rental agreement?
It’s up to you! Should you wish to take ownership of the system(s) rented at the end of the primary rental period, then title to the goods will be transferred to you for a previously agreed sum. This will never be more a maximum of 2% of the original value. - What is the APR on your agreements?
A rental does not attract an APR. The agreement states that you are renting the goods for their useful life (i.e. the term of the agreement) and after that time you will give them back. This means that you can claim each rental as a business expense and offset the payments against your taxable profit at the end of the year.
As you are claiming the allowances and are not depreciating the goods as an asset of the business, an APR is not involved.
Please contact our sales team on sales@ibertek.com or 020 7692 4830 for further information.
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