The benefits of finance leasing within Education
You wouldn’t let three to five years pass without upgrading your smart phone, so why treat upgrades to your school’s assets and equipment any differently?
Let’s face it. In today’s world, and as seen in the last six to 12 months, IT changes pretty quickly. The question is are you keeping up with the changing demands and expectations of students, parents and staff?
The impact of COVID and the ability to deliver during these unique times has made it clear that by having up to date technology and robust business continuity plans in place, your students can still experience uninterrupted learning, therefore still managing and maintaining high levels of performance across the cohort during everchanging times.
But when locked into a debt product, how do you manage upgrades to equipment frequently without any flexibility?
As platforms and technologies are changing, you too need to change and update with the times. So why invest in depreciating assets and something that is going to become obsolete? Whilst owning your product outright at end of term may seem appealing, there are many benefits that an operating lease offers, worth taking into consideration during the procurement process.
Cashflow. Unlike a finance lease or chattel mortgage, an operating lease avoids capital outlay. With the option of fixed costs, it avoids residual risk in depreciating assets and this is particularly true for IT where obsolescence is at play. Whether it’s a laptop, musical instruments or even playground equipment, this type of finance tends to be more aligned with the effective life of the asset for the end user. You may also find finance solutions outside of an operating lease, may cost your organisation more in the long run, should you choose to extend the life span of your technology. The shorter the term the better.
Disposal. Ask yourself what do you do with your three to five year old devices at end of term? Is offloading obsolete IT equipment an effective use of staff time and salary expenses?
If your answer is in fact that your school sells it off or disposes thereof via other means, it might be time to evaluate your overall cost and effort. Take into consideration the inflation of IT assets each year in addition to the regular maintenance of this equipment over the duration of its life. This probably applies to a whole range of assets however it’s important to remember that once the initial warranty period is over, repairs, maintenance and replacement parts become scarce and more expensive to obtain.
Opportunity costs. When using cash to invest in IT assets, you are undoubtedly left with a dent in the bank account, which means you may be missing out on other opportunities to expand and improve. Whether it is investing to generate further income or having additional funds to grow your organisation with new and updated assets, on what could that cash be better spent?
Risk management. If there is any uncertainty with the asset, an operating lease allows you flexibility to hand the assets back. An operating lease could also enable a school to keep up to date, whilst not having to take unnecessary risks. During COVID, we saw IT departments under pressure to accommodate remote and flexible education structures to support home learning. Some schools were still set up with desktops for admin staff, with no laptops to accommodate working from home arrangements. During this time, if schools were not prepared, the turnaround times for the delivery were often quite lengthy, due to delays with overseas shipments and distribution. Once the momentum of upgrading has commenced, handing back, and thinking about the period of use for your equipment, you’re less likely to risk the chance of being underprepared in the event of unexpected changes.
Operating leases can also be beneficial for the acquisition of assets beyond technology. Rowing boats for example, with an active secondary market for this asset, means the feasibility of returning the asset at end of term allows for the upgrade of new rowing boats. The same applies to gym equipment. Whilst these assets may last longer than the life span of a laptop, there comes a time where they too will need an upgrade – so it makes sense to set yourself up for adaptability.
If you are considering an operating lease as the right solution for your school’s requirements, it helps to have a thorough understanding of the benefits, which is how an asset finance specialist can guide you. By having the right finance option for your school’s needs, you may be in a better position to make more frequent and less time-consuming upgrades to existing assets and potentially enable further ease when procuring new equipment. Unlike being locked into a fixed finance lease, an operating lease matches the period you need to use the asset to the finance term, keeping your assets in good condition and upgrading regularly.
Not owning assets outright, doesn’t mean you are not able to access everything you need to maintain and grow your facility.
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