The Myths of Leasing
There’s more than a little misconception when it comes to school leasing, which is why in this short guide we’ve highlighted and answered some of the common myths of leasing.
Not much leasing is done in education.
False. In 2017 over £1 billion was written in Education leasing across the UK. That pretty much says everything that’s needed to be said about this myth!Schools DON’T lease.
False. From the top universities to further education, secondary schools, primary schools and nurseries…..…they all have benefited from leasing. We can tell because we have provided agreements for over 3500 of themWe MUST return the equipment at the end.
False. When a lease Agreement is terminated, there are a number of options available to you. One of those is to return the goods, another is to upgrade the equipment to the latest version or you may be able to make an additional payment to obtain ‘indefinite use’ of the goods. Invariably the applicable option lends itself to the equipment type. For example, it makes sense to upgrade IT equipment every few years, but upgrading your playground every few years wouldn’t.
Leasing is a cost-effective way to acquire equipment.
True. When you consider the total cost of investment, leasing provides a beneficial and cost-effective way to keep your school up to date with technology. Many schools make the mistake of simply comparing the purchase price against the total lease payments but fail to take into account the opportunity cost of having the money tied up is equipment which is simply devaluing over time.After all, a school wouldn’t dream of paying their staff three years’ salary in advance. They pay their teachers monthly as they obtain the benefit from their services.
The concept of leasing is exactly the same. Schools pay for what the equipment does and not what it is and leasing allows them to pay for the benefits of that equipment as they use it rather than 3 years in advance before they use it.
Another huge benefit to schools is there isn’t a large capital outlay when acquiring new equipment. Just like an “all-inclusive holiday”, a single easy to manage lease payment can include the cost of warranties, supplies, software, installation and sometimes maintenance which would all be additional costs when purchasing outright.
School aren’t allowed to lease equipment.
False. Schools are allowed to lease, however they’re not allowed to take a form of ‘credit’. This is why the Department for Education & Funding (DfE) recommends schools use Operating Leases, as the school isn’t borrowing any form of credit because the lease provider owns the equipment and rents it back to the school. The school then pays the agreed rental fees for using the equipment.The payments have to stay the same once agreed.
False. If you choose to work with a bank or a lease broker, this will most likely be the case. But, if you work with an independent lease provider, such as Funding 4 Education, they will be able to provide more flexibility with the payment profiles to reflect your budget, so under-spends and overspends can easily be accommodated. Payments can also be stepped so if you have a shortfall in this year’s budget the payments can be lower in the first year and then increase (“step up”) as next year’s budget becomes available.Leasing requires a large deposit.
False. There shouldn’t be any requirement for a deposit whatsoever. The first rental should only become payable after the equipment is installed, so you’re paying for the equipment as you use it. In many cases, schools can also “defer” the first payment for up to 6 -9 months, which means that your school can benefit from new equipment immediately and won’t have to start paying until say the new budget funds are received.We can’t lease equipment we already have.
False. Independent lease providers can do something called “Sale and Leaseback”. Here, the lease provider will give you back the money you paid for the equipment (IE purchase the goods from you) and rent them back to you. This is an ideal way to generate instant capital for other project and also allows you to get all of the benefits of leasing, whilst having full usage of the equipment.Lease the type of equipment I need is not possible.
False. Leasing can work for all types of equipment big and small, and the types of equipment widely vary. From IT equipment, visitor management systems and servers, all the way through to fire doors, playgrounds and furniture, almost any equipment in your school can be leased. We’ve even been asked to lease a “stained glass window!” As a standard rule of thumb, if there’s a physical item included, it can be leased. If your current leasing provider says a piece of equipment can’t be leased, change your leasing provider.Leasing is complex and something we should avoid.
False. Leasing is a really simple process often over-complicated by brokers and lease providers who make the process feel more complicated than it really is, particularly when it comes to the paperwork. That’s why you need to look for a transparent and experience lease provider that has your best interest at heart and doesn’t over complicate things. Perhaps Funding 4 Education?!
Still have concerns about leasing?
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