In this article Martin Cadby and Mike Rixon, relationship directors at Close Brothers Technology Services explore what it means to lease your IT and why it could be the best option for your business.
According to the Global Leasing Report, the UK is Europe’s biggest leasing market – worth a staggering £62 billion a year – having grown by 9% in 2017.
When we think of the types of assets businesses lease, we are all too familiar with cars, commercial vehicles and manufacturing equipment, but we are seeing more and more businesses starting to lease their technology equipment.
In today’s digital economy, every business must invest in the appropriate technology at the right time to keep their business moving in the right direction and ideally use these technology platforms they’re investing in as an enabler to compete in the highly-competitive markets they operate in.
Whether this involves investing in additional technology as part of a growth strategy, such as handheld devices to ensure a workforce can access core data and business applications anytime, anyplace, anywhere, or implementing a more robust cyber security solution to improve data security – those that don’t invest, or delay investment due to budgets, can find themselves left behind by their competitors and severely put their business’ reputational risk on the line through increasing the chance of a cyber breach.
Is leasing really the more affordable option?
Many businesses see the primary cost of technology as the up-front purchase of equipment, but often the hidden costs are for ongoing support and maintenance.
There is evidence to suggest the year-on-year costs of support and maintenance over the life of the technology can often be more than two or three times the original technology investment price.
Leasing can be the more cost-effective option because you don’t need to fund the full cost of the technology, and by refreshing it more regularly you can see a significant reduction in the total cost of ownership.
At Close Brothers Technology Services, we understand the future value of all our customers’ technology, enabling us to invest what we call a residual value, which we subtract from the cost of the technology. This means that you don’t fund 100% of the cost of the equipment, helping to decrease payments significantly, reducing your total cost of ownership by anywhere up to 30%.
Reducing and delaying your VAT payment
There could be some VAT advantages with a business only paying the VAT on the lease rentals, for example, over a three-year period, rather than up front in one go. For those businesses that are unable to reclaim all their VAT on expenses, both the deferment of the VAT over the term of the finance agreement and the reduction due to our residual value investment can represent a considerable saving. We do, however, recommend that businesses should seek their own independent tax advice.
All this can really have an impact when a business is investing in a wide range of technology for their employees, such as desktops, thin clients, smarts phones and tablets, through to servers, storage and networking, along with any associated software and transformation services.
We work with businesses on regular technology refreshes and not being tied to any technology vendor means we can help you select the right technology for your business and the business outcomes that are driving your business’ technology strategy, which may be across various manufacturers and product platforms.
Cost savings, flexibility and the latest technology in your business; what’s not to like?
The Potential Benefits
- Cashflow boost through reduced rentals and low capital outlay
- VAT paid on lease rentals only
- Delayed VAT payments for businesses that have a significant disallowance of VAT
- Lower maintenance costs
- Payments linked to the usable life of the technology – certainty of budgeting.
Reduce (not eliminate) the risk of a cyber breach:
- Cyber criminals target the weakest link; more up-to-date equipment with better supported security patches
- Optional inclusion of data erasure software in lease contract.
Regular refreshes of technology, helping with:
- Increased business productivity through faster processing speeds
- Happier workforce with newer and better equipment
- Longer battery lifetimes for mobile employees.
Remove the technology ownership burden and disposal headache:
- Safe disposal of your technology equipment
- Equipment collection service with our world-leading recovery services partner
- Choice of options such as destruction, wipe, remarket and reuse
- WEEE compliant disposal
- Certified data wiping to UK and European Government standards
- On or off-site data removal security
- In-life data erasure service for reallocation of employee equipment.