Equipment leasing adds options
City officials are faced with the task of delivering services more efficiently as technological advances bring about an increased need for the provision of information and services. However, because of limited budgets, municipalities may not have the finances to purchase much of the equipment necessary for their operations.
Consequently, office equipment leasing has become an option for cities and counties that either can’t purchase an expensive piece of equipment, or that need the equipment only periodically. According to the Equipment Leasing Association of America, 80 percent of corporations nationwide currently lease some part of their office equipment.
Equipment leasing can be beneficial to city and county government offices in many ways. By leasing, municipalities can avoid spending the large sums of money associated with purchasing equipment and channel the savings into other important budget items.
True leases are preferable to installment sales in that the residual value of the equipment is factored into the financing rates, thereby lowering monthly payments.
For example, if a $1,000 piece of equipment is estimated to be worth $600 at the end of the lease, that ending value will be factored into the financing, which could make the monthly installments significantly lower when compared to a cash purchase.
Municipalities then can reap the benefits of current technology while providing an enhanced level of service from equipment that is slightly used. In many instances, much of the streamlining of municipal office functions focuses more on updating software and various procedures than replacing actual hardware.
Leasing also works as insurance against technological obsolescence — it saves onetime amounts paid for hardware and software that may be outdated in a year or even less. Computer capabilities and features have changed steadily every 18 months for the past 25 years, and in many instances, municipalities find themselves paying for technology that is no longer current. With leasing, the user only pays for the period of time that the technology will be useful.
Additionally, it allows cities and counties to establish a replacement or upgrade date, so they can automatically have access to new technology as it becomes available. And, municipalities can take advantage of extension or purchase options at specified intervals during the payment process or terminate payment after a determined period.
In addition to the savings municipalities can realize by leasing equipment, they also can avoid having to fund services such as application development and maintenance and staff training, the hidden costs of updating existing information systems.
The more advanced the technology, the greater the probability that more money will have to be spent on employee training or new hires. State-of-the-art equipment loses value when down-time increases due to improper use or lack of training.
However, options exist should a city or county government choose to further ensure its equipment investment through maintenance and staff training. For example, although many financial institutions may not lend money without tangible assets for collateral, vendors or lessors are available to finance the services.
Experienced information services financiers are in the best position to help local governments choose the best options. Many companies that specialize in the sales of computer hardware and software have experienced finance departments that work directly with municipalities to establish plans specific to their needs.