When the decision has been made to finance the use or
acquisition of personal property, the following questions
might prove helpful when determining which form of
financing is most suitable for your goals.
Keep in mind, a "Lease" relates to the rental
of equipment over time, and "Finance" relates
to the purchase of equipment with payments over time.
When considering whether to proceed via a leased transaction
or a financed transaction, consider these questions with
respect to your agency’s plans.
1.
Is there a chance that you’ll want to own the equipment
at the end of the term?
2.
Does the equipment need to be cascaded down within the
agency or department?
3.
Does your agency have a formal program that allows for
equipment to be replaced
in a timely manner?
4.
Is the equipment easily identifiable, and can all of
the equipment be located
at the end of the lease term?
5.
What are the anticipated challenges and cost of disposal?
If
the answer to Questions One or Two are "Yes," you
should not enter into a lease. The purchase price of
the equipment will cost more than the savings realized
by entering into a lease.
If the answers to Questions Three or Four are "No," you should
not enter into a lease. The costs involved with the extension of the contract
or the purchase option for the lost equipment will usually defeat any cost
savings that may have been obtained by entering into a lease.
The answer to Question Five will need to be looked at on an individual
basis. Disposal problems vary between government agencies. Can the old
equipment be disposed of in a timely manner, usually at the end of the
financed term? If not, the additional costs involved could defeat any savings
realized in a finance transaction over a lease transaction.
