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School Considerations for Entering a Lease Facility for Information and Communication Technology (ICT) Products The below is designed to be a useful guide to help Schools identify whether Leasing is the best option for their School. You should speak with the equigroup who would be happy to discuss your school’s specific requirements and help you make the right decision as well as answer any questions you may have. equigroup provide a dedicated telephone number for Victorian schools (03 8628 2390) or you can email them at [email protected]. Sourcing of new equipment from the Department’s preferred suppliers will provide cost saving benefits to Schools. In conjunction with the lower purchase price for equipment, the preferred rates available through this leasing program will reduce rental on equipment and provide a cost effective solution for your school. Before entering any Lease facility, the School should give consideration to the reasons the School Council wishes to utilise lease finance. Some principal considerations surrounding leasing of equipment should be: There are benefits to both paying cash for equipment as well as financing equipment through a lease. The right decision is based on each school’s specific situation and requirements. The table below highlights some of the key differences between leasing and paying cash. Lease No large cash payment - Leasing offers 100% financing with; No deposit; No up-front establishment fees, Conservation of working capital Cash Purchasing equipment with cash allows schools to utilise excess capital if it is available. Operating Expense – Lease payments are operating expenses. Capital Expense – Cash purchases are capital expenses. Low effective interest rate – Lease rates can be lower than the cost of capital associated with outright purchase. The amount financed is less than the purchase price as a residual value (value of the equipment at the end of the contract) is deducted from the financed amount. The cost of capital, or opportunity cost of committing capital to owning depreciating assets, may be higher than the implicit lease rate and should be factored into the Total Cost of Ownership of the purchase. Known Repayment – Lease payments are fixed for the term of the lease One off cost – equipment purchased is then depreciated over the term of its useful life. Technology refresh –Schools have the ability to refresh equipment on a regular basis. Reminders are provided and information is available online to ensure that technology stays up to date. Technology refresh –Schools have the ability to refresh equipment according to their own timetable and to manage this with their own systems. Management tools - equigroup provide an industry leading on-line management tool (TheAssetAdvantage™) that facilitates the efficient management and tracking of equipment. There is an additional Enterprise version that can be purchased which allows for enhanced management, notifications and financial reporting. Management tools - Schools have the flexibility to procure and manage their equipment using a tool of their own choice. Additional Services Additional Services equigroup offer a wide range of additional services including delivery, storage and installation for Schools have the ability to source their own services separately or use their own General Leasing – Reference Guide February 2014 technology refresh. At end of lease; collection, disk wiping. The cost of these services can be included in a single low rental payment. In addition, the return of leased equipment to the previous lessor or the resale (or environmental disposal) of old owned equipment can be provided. resource to manage installation and dispose of old equipment securely in an environmentally responsible manner. Prior to the end of the lease term the school will be notified of its options regarding the equipment. These options are: 1. Return the equipment – This can be organized online through equigroup’s on-line tool. The school has the option to arrange collection and other services such as secure disk wiping of equipment as part of the rental. If the school requires the equipment for longer, the rental continues at a pre-agreed discount until it is returned. 2. Extend the term of the lease – By committing to a fixed term extension for equipment additional discounts on rental apply. 3. Purchase the equipment – If the school decides to purchase the equipment a quotation will be provided at fair market value at the time. Consideration should also be given to the care and maintenance of equipment. Damaged equipment may incur penalties and result in additional costs for Schools. Fair Wear and Tear is acceptable, however damage beyond this may incur rectification costs. A detailed guide is available for schools by contacting equigroup. Insurance is not provided as standard, but is available through equigroup. In addition, the optional schools package provides a waiver for a degree of damage to avoid any unexpected costs. For more information on the Technology Fleet Management for Schools package please contact equigroup. Where possible, the School should select a lease term that matches the warranty period of the equipment or purchase an extended warranty from the supplier. This will ensure the lease will expire at the end of equipment’s warranty period. Additional options are also available; schools should contact equigroup to discuss specific requirements. When adding upgrades to equipment which is leased, Schools should also lease these and equigroup can match the term of these to the remainder of the lease term of the existing equipment. This ensures that the upgrade and the existing equipment leases expire on the same date. Schools should consider paying their leases through Direct Debit. This will eliminate the overhead of processing of invoices and payments. General Leasing – Reference Guide February 2014