Capturing the benefits of high-tech leasing.

Leasing's pay-as-you-go approach to financing and its hedge against obsolescence have long afforded businesses a way to conserve cash and better manage equipment. About eight out of 10 American corporations lease at least part of their equipment portfolios, according to the Equipment Leasing

Association, an Arlington, Virginia-based trade group. And in fact, equipment leasing has continued to grow even after the Tax Reform Act of 1986 eliminated major tax incentives for this form of financing. The U.S. Department of Commerce estimates that leasing volume totaled roughly $120 billion in 1990, up from $45 billion 10 years earlier.

Leasing information technology equipment is particularly advantageous because the technology evolves so rapidly that some computers become outdated, in terms of the original user's purposes, within months of their installation. When a company has invested heavily in purchasing its own computer system, it cannot as easily take advantage of newer, more versatile equipment without incurring great expense or until the existing hardware is fully amortized. And unless you're an equipment expert, it is very difficult to know how to remarket these assets yourself to receive appropriate compensation.

Most business can count on savings with short-term operating leases. Because there is a strong market for used high-tech equipment, leasing companies can offer equipment at a discount and then sell or re-lease the same equipment to another user. In fact, many businesses use a strategic mix of new and used equipment. With new and used equipment price/performance dropping by 20 to 50 percent each year, companies can typically save 40 to 70 percent by leasing or purchasing used equipment--without significantly sacrificing performance.

NOT THE SAME OLD THING

As in so many other areas, the name of the game in leasing these days is value added. An independent industry consultant, the Gartner Group, Inc., recently reported that "... leasing [of high-tech equipment] can provide financing and asset management services that are not necessarily inherently in a lease and that purchase does not provide. Considering leasing as a suite of services, each with a cost and benefit, may be more appropriate."

Demand for high-tech lease financing is growing because management of these assets is becoming more complex. Companies are going global, reengineering their systems, and shifting applications from mainframes to local area networks while trying to maintain or increase performance levels and pare expenses.