To Lease or Not To Lease

School Administrator, April, 1998 by William A. Hamilton

In the Beginning

With at least some initial parameters in writing, we set off to explore the world of leasing. In June 1995, we sent 24 vendors a set of bid specifications that called for a three-year lease of 154 computers that were less than three years old; minimum technical specifications; set-up and delivery; and 24-hour on-site repair or replacement. We received seven proposals and selected a proposal of used Compaq computers costing about $43 per month per machine or $237,172 over the three-year life of the lease.

The vendor, from whom we leased, MicroAge of Novi, Mich., told us had we purchased the same computers new and bought the same warranty service for three years it would have cost approximately $400,000. Leasing used computers saved us about $163,000 over the cost of buying new machines, complete with three-year, on-site 24-hour repair or replacement.

Now in our third and final year with this first group of leased machines, our experience has been excellent. I can count on one hand the number of calls I have received about the leased Compaq computers being out of service. In June, we will have the option of purchasing these computers for $91 or the vendor will pack them up and ship them off to the lease agent.

The Leasing Agent

It didn't take us long to realize we were novices in the world of leasing. After our board of education approved our recommendation to lease, we processed a purchase order for the computer vendor. MicroAge, however, informed us that we would not pay them but rather the lease agent. They had bid through the leasing agent with whom they had a partnership. We suddenly realized we now were dealing with two vendors--the service provider and the lease agent who provided the financing. Although we needed to return to our board with a revised resolution, it worked out well in the end.

As a result, we solicited bids for 450 additional computers in year two, following the same process. Because we picked a different vendor, O/E Systems of Troy, Mich., we now found ourselves working with two service providers and two lease agents. The future was looking awfully confusing.

Our district's executive director of business services, Sandra Motz, and I decided to interview lease agents to examine our lease options. Through this process, we learned that most organizations that lease tend to use a single lease agent as a point of contact for financing and coordination of services. We subsequently interviewed several lease agents, prepared a bid document and finally entered into a five-year contract with one agent, O/E Systems, to provide all financing and services.

Each year, the firm will finance, at an agreed rate, the computers for which we receive the lowest bid. In addition, they will provide configuration of computers at their plant, setup and delivery of all leased computers, 48-hour on-site repair or replacement, asset management inventory of all leased computers, help desk support for our computer resource teachers and technicians and packing and shipping at the end of the lease.