1 Reply Latest reply on Oct 5, 2010 11:23 AM by Sharon Horton, PMP

    Leasing Best Practices

    Ken Miklos Master

      Who is using (or planning to use) Ariba Contract Management for leasing agreements?  Any lessons learned or thoughts to share?

        • Re: Leasing Best Practices
          Sharon Horton, PMP Master

          Although I don't have a leasing "Best Practices" document, here are some notes on leasing contracts that you all might find valuable.  If anyone has any other lessons learned or notes to add, we could consolidate this into a more formal document.

           

          Also, there are several books on the market specifically dealing with equipment leasing contracts and financials; you can find the list on Amazon, for example.

           

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          Equipment loss, theft and damage are concerns affecting the ability of the lessee to return like for like equipment.

           

          Companies have trouble installing, maintaining, supporting, and tracking equipment

           

          The decision to lease is due to the administrative budget process, and not part of an intentional corporate plan to conserve capital.  A lease/buy analysis should drive the decision.  Lease/buy analysis can be quite complex including calculating the fair market value, residuals, time value of money and will be based on a refresh cycle.

           

          Lease agreements can be quite complex including requirements for quiet enjoyment, FOB terms, DOA processing and end of lease requirements for equipment return including what constitutes normal wear and tear for the equipment.

           

          Residual value may be less than the cost of the manpower necessary to locate and return the asset.

           

          Concerns:

                      Asset Management.

          End of life disposition of PCs

                      Technology turnover.

                      Software compatibility and standardization.

                      Compliance to corporate standards on use and additions, particularly software       Loss of PCs.

                      Total cost of ownership

                      Installation, training, maintenance, control, and support

           

          Because the cost of managing the asset is so high relative to the value of the asset, the decision is sometimes made to not manage the asset.  Leasing may force management of an asset that otherwise would not be managed.

           

          Leasing Contract Terms:

           

                      Flexibility for upgrades and replacements.

                      Early outs.

                      Quiet Enjoyment

                      Keeping PCs longer than term.

                      End of Lease penalties.