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IT Equipment Buy vs. Lease Decision. Gary E. Carpenter, CPA Technology Assurance Committee Tuesday, December 3, 2002. A Little History. IBM’s Market 1952 Antitrust Lawsuit 1956 Consent Decree. 1956 Consent Decree. IBM must: Sell it’s equipment as well as rent or lease it.

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It equipment buy vs lease decision

IT EquipmentBuy vs. Lease Decision

Gary E. Carpenter, CPA

Technology Assurance Committee

Tuesday, December 3, 2002


A little history

A Little History

IBM’s Market

1952 Antitrust Lawsuit

1956 Consent Decree


1956 consent decree
1956 Consent Decree

  • IBM must:

    • Sell it’s equipment as well as rent or lease it.

    • Offer maintenance to all users of IBM equipment.

    • Make parts and subassemblies available for sale.

    • Not restrict the buying and sell of used equipment.

    • Not purchase used equipment and send it to the scrap pile.

    • Not prohibit or control alteration to it’s equipment.

    • Set up a restricted “Service Bureau Corporation” to market computer services.


Third party computer industry
Third Party Computer Industry

  • After the 1956 Consent Decree

  • New industry is born

    • Third Party Computer Companies

    • Third Party Engineering Companies

    • Refurb Companies


What should we look at in the buy vs lease decision
What Should We Look At In The Buy vs. Lease Decision?

  • What are the numbers

  • What is the life of the asset

  • Corporate policies

  • Residual value

  • Upgrading

  • Technology

  • Cash and/or financing resources


You decide to buy
You Decide to Buy

  • How will you pay for the asset?

  • Identify the Economic and Corporate Life of the asset.

  • Plan on how you will dispose of the asset.

  • Plan your replacement/upgrade asset now.


You decide to lease now what
You Decide to LeaseNow What?

  • Work with a company you know and TRUST!!!

  • List what your needs are.

  • Do “what if” scenarios.

  • Have an exit plan at the end of the lease.

  • Beware of the low number.


The lease ends what do we do now
The Lease Ends,What do We do Now?

  • Know when the lease ends.

  • Make sure you know when the lease ends.

  • Then check again to see when the lease ends.

  • At least six months before the lease ends:

    • Decide if you want to keep the asset

    • Contact the lessor

    • Negotiate new contract or prepare to return the asset

    • If returning the asset what is your replacement plan


We made the wrong decision
We Made the Wrong Decision!!

  • If the asset was purchased:

    • What is wrong?

      • Technology

      • Asset

      • Impact on financial statements

      • Finances


We made the wrong decision continued
We Made the Wrong Decision!!(continued)

  • If the asset was leased:

    • What is wrong?

      • Technology

      • Asset

      • Impact on financial statements

      • Lease agreement

      • Residual value of the asset


Gary e carpenter cpa

Gary E. Carpenter, CPA

Carpenter Information Technologies, Inc.

P.O. Box 15278

Syracuse, NY 13215-0278

315/487-4567 * Fax 315/487-2663

E-mail: [email protected]


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