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Buy or lease? What end users and resellers should consider

  • utworzony przez Norbert Cremer, Senior Manager Product Management at Gigaset
  • Aktualności Gigaset pro
  • local news

To buy or not to buy? Whether it’s real estate, vehicles or IT and telecommunications assets, every once in a while companies face the decision to buy or to lease. At the same time, an increasing amount of resellers struggle with a similar dilemma. Should they stick to just selling telecoms equipment, or add leasing options to their services?

Below is a list of things to consider, for end users as well as for resellers, if you find yourself at a fork in the road and need to decide if leasing is the best option for your company.

What end users should consider

  • Long run versus short term – For companies that have the required financial resources, buying is in many cases the most cost efficient solution. It might ask for a larger investment at once, but in the long run the purchasing costs will be lower than the accumulated monthly costs for leasing. At the same time, leasing offers companies with less cash flow and less money in the bank the opportunity to invest in hardware they normally wouldn’t be able to afford. 

  • Costs versus flexibility – Buying equipment might be the most cost efficient option in the long run, but in some situations the long run may not be that important to you. Especially with IT and telecoms solutions it might more important to always have access to the latest technology. In such cases leasing might be the better option because it offers you the flexibility to upgrade your equipment more often without the need to resale your outdated systems. Particularly if the residual value of the equipment is close to zero after several years of usage.

  • Certainty versus unpredictability – One of the advantages of leasing is that financial impacts as it might be caused by unexpected system expansions due to rapid growth will normally hit you with a moderate increase of your monthly rate. When you buy the equipment this is not so much the case. The impact of an unplanned investment into additional equipment might impact your business much more significantly than the increase in monthly expenses. 

  • Independency versus dependency – As long as you have the right amount of financial resources, you will be able to remove or sell old equipment and to purchase new systems at any time you require to exchange your systems. With leasing you might find yourself in the situation that you want to remove and exchange your equipment, but won’t be able to do so easily because you are bound by a lease term.  

What resellers should consider

Opportunities

  • Lower the threshold – Of course, buying equipment will remain the preferred option for many of your customers. But particularly for companies with a smaller budget, offering them the option to lease will give you additional selling opportunities, opening up more business opportunities and consequently will help you to generate additional income. 

  • Wider business model – Leasing to other companies will provide you with opportunities to build stronger relationships with your clients. The end of a lease contract for example will give you an excellent opportunity to discuss equipment renewal. Also, the leasing companies in most cases will allow you benefit from a commission based on the value of the leasing project, which can also help you generate more revenue. 

  • Financial certainty – One of the advantages of leasing to other companies is that you’ll have income security. If, for example, a client is no longer able to fulfill its financial obligations, you won’t have to suffer the consequences because it’s the leasing company that you have an agreement with.


Challenges

  • A new role – Leasing IT and telecom solutions to other companies will require you - to some degree - to act as a consultant and broker. Not only will you need to arrange things with clients as well as distributors, you will also need to interact with the leasing company and be able to understand and explain leasing terms, conditions and options within a lease term. 

  • Learning curve  – Leasing will require additional sales skills and you might have to educate your sales team. Where the team first needed to focus mainly on their equipment expertise and traditional selling skills, they will now also have to be able to advise clients on monthly cost considerations and lease plans – which might be a sales approach to be learned and exercised to be applied successfully.  

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