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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: gcarpenter-cit@worldnet.att.net