How to give computers a new lease of life

9th March 2001 at 00:00
If you thought leasing was just for company cars and photocopiers, think again. Hugh John looks at the implications for ICT.

How important is it for you to own the equipment you use? Would you object to having a company car? Do you rent your TV set? Do schools really need to own all their computer equipment?

Leasing, simply, is a financial mechanism that enables you, the lessee, to have use of property or equipment which you do not own and have not paid for. A leasing agreement usually involves three parties; the lessee, the lessor (a finance company) and the equipment or property vendor. The vendor can often supply finance, in which case the agreement involves only two parties.

Although widely used in the commercial sector for some years - think car fleets and photocopiers - leasing is gaining a high profile in education for information and communications technology (ICT).

The cost of new technology and the constant need to "refresh" it means that schools and colleges are seeking finance plans that are flexible and give them what they want, when they want it. They are also having to re-evaluate the worth of their capital assets. Time was when you could return to your old classroom and still find your name where you'd carved it one stuffy Friday afternoon 10 years ago. Not now. The replenishment cycle of modern equipment is far more frequent and, with computers depreciating so rapidly, a new financial model was needed.

RM has been leasing equipment for a decade, and marketing manager David Carey estimates that 10 per cent of its customers now lease - a figure that is rising by one to two per cent each year. The company works with two financial partners, and David Carey describes RM's role as "brokers acting on behalf of our schools". Three or five-year leases are the most common and, after the first year, schools are able to free up some of the capital spend, variously referred to as either an "exchange allowance" or "new spend".

It's a way, says David Carey, of "smoothing out the bumps" and one that is favoured by many schools. Peter Kerruish, bursar of Ibstock Place school in Roehampton, is enthusiastic: "We've always used leasing to finance our ICT equipment. As we can spread the costs, it helps to ensure that we spend the same amount of money on ICT every year and enables us to budget effectively. Also, with the free-spend allowed in agreements, we are able to renew and replace our equipment regularly without incurring extra costs. I would definitely recommend leasing to other educational establishments who are considering it."

There are compelling reasons for leasing. Alan Stevens, vice principal of Sawtry Community College sees it as a way of avoiding the "feast or famine" pattern endemic in many business plans: "Sawtry has enjoyed the feast money of NGFL, specialist college funding and sponsorship," he explains. "All these are typical pump-priming which gives you excellent computer suites for two years, but then students and teachers want more computer suites and the two-year-old PCs need replacig. The feast can soon turn into a nightmare." The college has taken out a pound;100,000 lease over five years to pilot the use of laptops with staff and a group of volunteer students.

Sawtry has a leasing arrangement with Syscap (Systems Capital) a finance company which, for the past six years, has run a specialist education department that works with over 3,000 schools and colleges in the UK. Director of education Sean Reid suggests that the main benefits of leasing are threefold: first, it enables schools and colleges "to acquire ICT on day one"; second, payment profiles are extremely flexible and can be tailored to suit any school; third, a credit facility can be built into a lease which enables schools to "future proof" their ICT investments by upgrading as and when they see fit. Syscap, Sean Reid points out, encompasses more than just leasing, offering clients technical services, asset management and disposal of old equipment.

ABK, based in Manchester, has been leasing equipment to education for over 60 years and this now includes ICT. As part of the Education Rewards Consortium it has provided schools, local education authorities and Education Action Zones with laptops for as little as pound;5 a week over a three-year period. This fee covers insurance and warranties that cover every contingency save negligence. Within the operating lease contract there is provision to upgrade at any time. It is, claims ABK, the lowest rental fee currently available.

"Schools want the fixed cost and peace of mind that leasing offers," says managing director Mike Fitton, who suggests that potential lessees should scrutinise any financial documents for hidden costs and the sort of small print that made the infamous "photocopier clause agreement" a byword for contractual obfuscation.

So what's the catch? Alan Stevens' only caveat is that financial resources raised in this way are prudently managed and not used "to purchase gadgets that do not relate to the strategic needs of staff and students - a lease is not a blank cheque or a limitless credit card".

There are also a number of practical checks that schools can undertake before entering into a leasing agreement. Dominic Savage, director general of the British Educational Suppliers Association, suggests the following:

"Consider using a leasing company with which other schools have had a successful arrangement. Give some priority to companies which go out of their way to demonstrate a service geared to education. Look for company brochures that describe leasing in an educational context with arguments that show an understanding of schools. Speak to other schools who have run successful leasing schemes and make sure the fine print of the lease has been scrutinised by a competent financial officer."

Take this advice and, at the very least, you won't end up with the ICT equivalent of the photocopier contract from hell.

www.syscap-education.comTel: 020 8254 1870www.rm.comTel: 01235 826000www.educationrewards.orgTel: 0161 482 020 7537 4997

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