Computer leases are a mug's game, yet there seems to be no shortage of punters eager to boost financial institution profits. Leases only really make sense where the goods retain some sort of value over a lengthy period. Clearly, that is not the case with computer hardware (or even more mindboggling, software).
Governments have taken to leasing everything that isn't nailed down, simply to hide debt. Leasing disappears into operating expenses, whereas borrowing the money to buy something seems to makes credit rating agencies waggle their fingers disapprovingly. Leasing is popular with state governments here, for example, because their total borrowings are restricted by the federal government. 'Sale and Leaseback' is a concept that defies any kind of rational scrutiny. :roll:
Struggling corporates also embrace leasing for the standard reasons of deferring reality: "Just worry about this year. Next year can take care of itself, and besides, we or the company may no longer be here."
Don't misunderstand, leasing of plant and equipment makes good sense when a company is expanding and needs to preserve cashflow. And rates will be good if the lease tracks the asset's realistic value (because the financier is always covered).
AFAIK the tax 'advantage' falls into the same category. If you can depreciate an asset over three years, its entire value plus interest is tax deductible over that period. So are lease payments. Anyone who believes they can gain an easy advantage gravely underestimates the taxation beaucracy.
There's a worrying trend in Oz for retailers to push lease (hire) agreements onto individuals and small businesses. For example, Dell is currently advertising a P4 1.8 with LCD monitor for AU$1999, or only $14.40 a week.
Unfortunately, the contract duration is four years, not three, so the hapless buyer ends up paying $2995, plus a whopping $99 delivery! And that is one of the more reasonable schemes I have seen.
The real killer is when you decide you want to upgrade after two years, as many such schemes 'offer'. If they're unbelievably generous, you may only owe them half the original purchase price plus a penalty. Of course, the computer will be worth a fraction of this by then, so you can't fund an escape by selling it.
In effect, you continue to make your lease payments as if nothing had happened, except you also have to find more than half the original value of the goods in cash.
But that doesn't happen in real life. Real lease plans are way more punitive than that. Lease payouts are often determined by the "Rule of 78", which effectively guarantees you will always pay the 'interest' for the entire lease, regardless. So if applied to the Dell example, after two years you would owe nearly $1500, even though the original price was just $1999, and the realizable value may be only $500.