Leasing instead of owning tech: the new business mindset

By Mike Hanzel, Wells Fargo Equipment Finance, Head of Technology Group

Private investment by U.S. businesses in equipment and software is forecast to be more than $2 trillion in 2023  with much of that being financed. According to Ralph Petta, President and CEO of the Equipment Leasing and Finance Association (ELFA), slower economic growth underlies the trends this year as equipment acquisition continues to drive supply chains across all U.S. manufacturing and service sectors. Nearly eight in 10 of U.S. businesses currently use equipment leasing and financing to acquire the productive assets they need to operate and grow.

Leasing: the new reality of business technology

Business technology is a major area of focus for equipment leasing. That new laptop you delivered to the marketing team this morning? The manufacturer just released a sleeker, more powerful version. Last year’s smartphones for the sales force? Compared to the latest model, they function at half the speed and connectivity. Ditto for the servers in the data center and the desktop PCs in accounting.

For business leaders, the effort required to keep your organization’s digital tools running at peak performance can be staggering—and expensive. Few assets depreciate faster, or involve more legwork to track and maintain. Even responsibly disposing of outdated equipment creates headaches.

Optimize your technology lifecycle

To combat these challenges, more finance and IT professionals have adopted a new mindset: leasing rather than owning your core business technology. It’s a fresh perspective that’s less about borrowing funds, and more about the optimal way to manage your organization’s technology investment.

Today’s technology leasing programs emphasize a comprehensive, enterprise view of technology that supports more frequent refreshes, and greater external support for asset tracking and recycling.

By leasing your business technology, you can

• Allocate more capital to your business—instead of depreciating assets
• Mitigate the costly repairs and employee downtime often associated with older equipment
• Shift the burden of obsolescence to your lender
• Reduce the risk, workload, and expense of asset disposal
• Minimize the security risks inherent in outdated systems

Working with your financial institution—rather than leasing through separate, manufacturer-owned finance companies—can deliver additional advantages. With your bank, a single master lease can support a variety of equipment, from hardware to software to enterprise systems, regardless of manufacturer or platform. This turnkey option helps you reduce the hassle of managing numerous relationships.

More importantly, working with a bank can eliminate potential financial penalties at lease end and puts you in control of the vendors and technology that will help your business thrive.

Must-have services from your leasing provider

As you evaluate your options, look for financing providers who can provide these time-saving services:

• Tracking solutions. Keeping tabs on thousands of individual technology assets, deployed across users, departments, and locations, takes time and precision. Top lenders can reduce your workload and improve your accuracy with convenient electronic tools that centralize serial numbers, lease schedules, and asset disposition. Stakeholders in procurement, IT, and operations will appreciate easy access to information.
• Flexible returns. No matter how diligent your organization, a small portion of your leased assets will inevitably end up missing or damaged. You’ll have peace-of-mind and a stronger relationship when you work with a provider that clearly dictates return policies upfront. Ask about flexibility with timing, such as the ability to return or buy equipment off-schedule.
• Complete lifecycle services. Leasing enables you to replace aging hardware more frequently. However, faster turnarounds can turn the sunset and disposal process into a full-time job. Safeguarding company data and minimizing environmental impacts add to the workload. Fortunately, leading providers can share best practices and offer support services to streamline this labor-intensive process. Your financing structure should also support your overall lifecycle strategy. Look for flexible terms that enable you—and not your lease—to determine when you migrate to newer models.
• Start-to-finish support. After approval, some capital-starved financers may sell your balance to another lender, in order to fund the lease. Look for an all-in-one resource who will maintain your balance, safeguard your business data, and support your goals at all stages of your lease. Working with your bank lets you bundle equipment leasing with other bank services, to obtain the best possible rates. It also ensures fair treatment at lease end, whether you return or purchase your equipment.

Business today—from insurance to retail to manufacturing to education—relies on technology more than ever before. At Wells Fargo, the equipment finance team works hand-in-hand, across the bank, to understand the specific needs of every organization. We can design a technology leasing program that matches your goals.