To lease or purchase . . . . . . . that is the question

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Is it better to buy equipment outright or to lease it?

What are the factors that need to be considered?

Questions for reflection include:

  • How much cash do you have on hand?

    If the school has healthy working capital, then it might be worth using some of it to purchase assets outright -  and vice versa. Leases can be good  a way of providing quality learning experiences whilst working away from a working capital deficit position.

  •  Does the school usually get long life from the assets in question?

    Most schools do, but if the assets – especially chrome books and  iPads – tend to be damaged, lost or potentially  vulnerable to theft, then a lease arrangement might be indicated.

  •  How many leases are too many?  

    Does the school have a lot of other leases? The MOE has a guidance tool which can be helpful. It considers and compares the cost of leasing vs buying over time. The tool can be downloaded here. The MoE borrowing limit is 10% of the annual Ops Grant, though most schools are well within this. 

  •  Is depreciation also a factor?

    For instance, if the school purchased 100 iPads ( about $100,000 ) at the same time, then they would then all be depreciated off the Asset register at the same time with a consequential increase in depreciation allowances. It can be helpful to purchase significant IT assets in batches over the medium term.  

  • Is there a clear link to learning outcomes in the strategic plan?

    Some suggestion of likely impact can be very helpful, especially at audit time.

  •  Does the Board have any preferences or policy about lease commitments? 

    This is another area where the expertise, assurance and advice of a Chartered Accountant can be very helpful.