Is it better to buy equipment outright or to lease it?
What are the factors that need to be considered?
Questions for reflection include:
How much cash do you have on hand?
If the school has healthy working capital, then it might be worth using some of it to purchase assets outright - and vice versa. Leases can be good a way of providing quality learning experiences whilst working away from a working capital deficit position.
Does the school usually get long life from the assets in question?
Most schools do, but if the assets – especially chrome books and iPads – tend to be damaged, lost or potentially vulnerable to theft, then a lease arrangement might be indicated.
How many leases are too many?
Does the school have a lot of other leases? The MOE has a guidance tool which can be helpful. It considers and compares the cost of leasing vs buying over time. The tool can be downloaded here. The MoE borrowing limit is 10% of the annual Ops Grant, though most schools are well within this.
Is depreciation also a factor?
For instance, if the school purchased 100 iPads ( about $100,000 ) at the same time, then they would then all be depreciated off the Asset register at the same time with a consequential increase in depreciation allowances. It can be helpful to purchase significant IT assets in batches over the medium term.
Is there a clear link to learning outcomes in the strategic plan?
Some suggestion of likely impact can be very helpful, especially at audit time.
Does the Board have any preferences or policy about lease commitments?
This is another area where the expertise, assurance and advice of a Chartered Accountant can be very helpful.