Ways to save money 2

[PeaveyPhones]

Don't lease. I have experienced this first hand. A company I went to work for was leasing a Mitel SX2000 from InterTel. Every time we got a new phone it was something like $32 a month. 32 x 12 = $384 a year, five year lease, brings us to $1,920 for a phone. That's a lot of money for a phone. I kept trying to explain to my manager that this was a bad idea. All she came back with was "uh, its a tax writeoff". I'm no accountant but I don't have to be to see the folly of this approach. She just did not want to change. I talked to the CFO. She totally saw the wisdom of my idea and we started buying phones. This company grew from 100 employees to over 900 in the next year. We added 650 phones during that time. Phones bought at $225, 650 x 225 is $146,250. If we had leased them it would have cost about a million dollars. So I saved 850 thousand dollars. And that was just the phones. Then there were all the circuit packs to support them... I got a raise.
Now, my experience was an exceptional story from the 90's, but even on a smaller, more typical growth scale, there is money to be saved.
Yes, I know the lease and the maintenance are tied to together many times. Just buy the phones and circuit packs from an authorized dealer and leave the core of your switch on the lease.
Also when the lease is up you STILL have to buy it, at "fair market value".

Richard

 

[jlshelton]

Leasing often makes sense, when the lease terms are favorable. Besides possible tax advantages, a lease may allow a company to acquire equipment and still have operating capital from which to run their business.

In the ideal lease, one agrees to buy equipment at a certain price, and have use of it for XX years. At the end of the lease, the equipment has some residual value, and generally, one can optionally purchase the equipment at that value.

Then, instead of paying for the first XX years' of usage up front, one borrows the money at YY% interest. These days, interest rates can be very low, even subsidized down to 0% by manufacturers eager to sell more equipment.

So, if my choice is to pay $100k for a new system, or $80k for the first 5 years of a new system (betting that after 5 years, I've outgrown it), then I might be better off with the smaller committment. And borrowing the money might make sense here.

In your situation, the vendor was vastly inflating prices for a lease, and the purchasing manager was clearly incompetent. One doesn't have to arrange a lease directly with the vendor; good commercial banks can do the same thing on favorable terms.

These lessons are the same for leasing cars. Many people know they only want 3 years with their car, and will trade it in anyway. So, shopping carefully, they agree to a good purchase and trade-in price up front, thus locking in the total cost of ownership. There may be a slight premium for locking that in, but that's a fair cost of getting the certainty.