Leasing vs. Buying

Jason Marquardt

American Capital Financial Services

630-512-0066

jmarquardt@americancapital1.com

John Vonder

Providence Capital Network

800-680-0560

jvonder@ProvidenceCN.com

IASBO Annual Conference

St. Charles, IL

May 18, 2011

Overview

Introduction Leasing Basics Leasing Benefits Leasing Programs Initial Steps Lease vs. Buy Costs Pitfalls to Avoid Successful Programs

Providence Capital Network, LLC

Experienced in supporting more than 100 Schools with: Equipment Leasing

– Computer Equipment– Software– Copiers– Security Systems– Telecommunications– Transportation– & More

End of Cycle Remarketing/Disposal– Laptops– Desktops– Monitors– Servers– Routers– Telecommunications

Member of IASBO and other ASBO organizations Management experience serving on a school board

Independent Equipment Lessor for 100+ Illinois Schools– Laptops, Desktops and Servers– Monitors– Printers and Copiers– Athletic Equipment– Phone Systems– Buses and Vehicles– And Much More

Member of Illinois ASBO since 2002. Frequent contributor to IASBO Quarterly Newsletter Headquartered in Lisle, Illinois.

American Capital Financial Services, Inc.

What is a Lease?

By definition, a lease is a contract by which one acquires equipment for a specified period of time for a specified rent paid to the lessor.

For Schools, a lease is a way to acquire and/or finance equipment without voter approval.

Leasing does not constitute public debt. Typically smaller fees and easier to facilitate in

comparison to debt certificates and bonds.

What can be Leased?

Computer Hardware Software Network Equipment Printers & Copiers Telephone Systems Buses And Much More!

What are the Benefits?

Conservation of Capital (100% Financing) Consistent Budget Avoid Technology Obsolescence

– Minimizes break/fix time– Reduces user/teacher frustration

Lowest Cost of Funds Disposal issues eliminated Asset Management/Tracking

What Types of Lease Programs are Available?

Fair Market Value•Lowest Cost of Funds

•Flexible end of lease options

•Ideal in setting up an equipment replacement program

$1 Purchase Option•Often a tax-exempt lease

•Fixed ownership at the end of the lease

•Ideal for infrastructure or software projects

Why Pursue a Technology Refresh Program?

To advance technology within the classroom. To reduce technology costs within the district

(warranty issues). To eliminate headaches associated with a

mix/match of equipment (O/S issues). To support the educational needs now and in

the future.

Why Pursue a Technology Refresh Program? (continued)

State driven mandates for compliance. Eliminate disposal costs and headaches. “Going Green” initiatives (energy costs). Stay current with software licensing and

other total cost of ownership costs.

What Are TheInitial Steps?

Get a detailed count of your current environment (# of machines, location, age, etc).

Figure the future needs of the district (increase/decrease of users, types of usage, programs, etc.).

Determine what a reasonable annual deployment schedule could look like.

Investigate financial budget implications & options.

What Are TheInitial Steps? (continued)

Discuss the concept with the District Administration team and Board of Education.

Discuss the concept with vendors (equipment suppliers, leasing partners, etc.).

Select partners. Determine deployment goals with IT staff. Kick off the program.

How Can It BeImplemented?

By School Location (per building) By Grade Level By Building Type (K-12 District’s) By User (Students, Teachers, Administrators)

How Can LeasingPlay a Role?

Reduce the financial cost of technology within the District. (0% or below)

Create a balanced budget, with even annual expenditures.

Implement large projects at once without staging over many years.

Avoid equipment obsolescence. Eliminate the disposal costs and headaches

associated with refresh.

Lease vs. Purchase ($100,000 of computers)

Lease Payments

($32,000/year x 3) = $96,000

No out of warranty costs

Easy to forecast

Purchase Purchase = $100,000 Break/Fix costs Indirect costs for

unreliable equipment (user frustration, downtime)

What Are Some OfThe Pitfalls to Avoid?

Unequal Distribution of Resources (jealousy amongst users).

Lack of Administration Commitment. Re-alignment of Financial Resources. Different equipment models, operating systems. Selecting equipment that doesn’t match your

rotation.

Successful Tech Rotation Programs

Refresh Lease 3 or 4 year terms Leasing company owns the equipment Leasing company is responsible for disposal/liquidation Total payments are less than the cost of the equipment

Capital Lease with Remarketing in the Future 3, 4, or 5 year terms School owns the equipment Leasing company liquidates what you don’t want to keep and returns significant

revenue back to the school