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A capital expense (CAPEX) lease financing option for buying technology solutions

A dollar buyout lease is one of the two common traditional lease options. When an organization knows in advance of starting a lease arrangement for a technology solution that they intend to own the leased solution at the end of the term, they will use a $1 buyout lease. A $1 buyout is an ownership program and it is therefore considered a capital expense (CAPEX) lease for accounting purposes.

Additional accounting implications include the requirement to record an asset and its corresponding liability on the balance sheet. The asset will then be depreciated. This program is best suited for customers who know upfront that they want to own the equipment and expect it to meet their needs for a considerable length of time despite the accelerating change in technology the marketplace continues to experience.

Pros and Cons to a $1 Buyout Lease:

Pros

  • Low upfront costs
  • Manageable monthly payment
  • Great alternative to a cash purchase if intent is to own the equipment

Cons

  • The accounting of assets and liabilities may create unwanted balance sheet implications or financial ratio issues
  • Capital will have been used on depreciating assets rather than appreciating assets or income generating projects
  • Many organizations find themselves stuck owning equipment that is outdated & no longer meets their needs

Technology will certainly continue to change at a rapid pace. As much as possible, it is important for a business to understand their own needs in the short and long term when considering the purchase of telecommunications, unified communications and technology solutions. If a company expects growth or change, an operating expense (OPEX), like TAMCO Shield, may better suit their needs. Be sure to understand all of the lease options that are available so you are able to make an informed decision.

The HOW TO BUY is just as important as the WHAT TO BUY

Connect with TAMCO to learn more about lease options or partnership programs.

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