Introducing the Concept of Rental
- The basis of any operating lease is a rental agreement where the renter pays periodic rentals for the use of assets.
- Rentals are based on the reducing value of the asset throughout the term of the agreement.
- Ownership rests with the lessor throughout.
- No bargain purchase option or residual commitment is negotiated at the time of inception of lease.
- Operating leases must meet the criteria specified by prevalent accounting standards of the country.
- Companies benefit by using technology, not owning it
- To keep the competitive edge, businesses must continually invest in technology.
- Often, vast amounts of unutilised equipment is taking up valuable space at a high cost to company.
- In today’s fast-moving business environment, companies are finding it increasingly challenging to keep up with an even faster pace of technology advancements as IT hardware manufacturers and software developers continuously introduce new and better equipment to make users more productive.
- The useful lifespan of IT equipment has been steadily declining. This is coupled with continuing drops in acquisition costs – because what you pay for today is worth less tomorrow, never mind in a couple of years’ time.
These trends clearly indicates that ownership is no longer a viable option for company’s intent on staying current with new technology offerings and for those who wish to reduce the operating costs of technology.