Leasing Classroom Solutions:
The reasons, the maths and
the benefits explained.
So, why do over 50 % of our education customers (over 2,000 Schools in East Anglia) end up using an Operating lease ? This document hopefully explains what, why & how an Operating lease is? How it works? and why so many schools use them.
What is an Operating lease?
It’s the only lease as a state funded School you’re permitted to use. An operating lease is effectively a discounted rental over an agreed time, but with a difference. An operating lease will state that the School renting the equipment will never “own title” of the goods rented but actually, that’s not necessarily a bad thing !
How have they changed?
Historically you would enter a 3-4 year finance lease rental then at the end of the agreed term negotiate or be instructed how much you can continue to rent the equipment for on a per annum basis or own it outright for a then “fair market value”.
No finance Company or Bank ever wanted to “ rip off ” or get bad press from a School but the issue here was the unknown. The School were entering an agreement without knowing until the end of their initial agreed rental term what they’d be expected to pay for its’ continued use thereafter. Understandably this did not sit well with Bursars, Business Managers and key School stakeholders. Also previously, with hardware leased typically having a 3 year warranty a School could effectively be renting equipment that is not under a manufacturers warranty. A valid concern raised by the County Councils, Banks and Schools alike at that time.
These days a School can enter a 3-5 year Operating lease knowing exactly what their annual cost is for the max (5 year) rental period and beyond at the start of the process. The cost at the end of the secondary rental period is a specified one off fee of £199 + vat for its continual use or an annual rental of £100 per annum. Both these options cover all of the equipment leased, not each touchscreen.
With all front of class Touchscreen technology having a minimum of a 5 year warranty the risk of renting this equipment without it working (assuming you choose the right AV partner) is also removed.
What are the benefits?
- More classrooms (if not all) can have their chosen front of class solution installed at the same time. This avoids Teacher and pupil favouritism, disappointment and facilitates a “level playing field” for most if not all.
- The staff training (free from us at Proactive) happens en-mass or individually either online or onsite or to suit encouraging a collective uptake of the new solutions and often results in a “train the trainer” scenario.
- The solutions have warranties that begin and end at the same time. All within the lease period.
- Lesson plans and content can be shared for use across all classrooms which all use the same technology for both hardware and software.
- The solutions are maintenance and maintenance cost free. There are no ad-hoc patch up or quick fixes on old pieces of equipment such as a SMARTBoard, speakers or a projector as you wait for next years budget release to upgrade further rooms. This prevents unplanned expenditure and more importantly classroom disruption.
- They can actually save you money over the 5 year warranty period and beyond. (see below)
- A School wide roll out and install of the latest technology in all classrooms appeals to many parties current and potential such as parents, pupils, staff and stakeholders.
- The commencement of an operating lease payable on a quarterly basis can be deferred to coincide with budget release to the School.
How does an Operating lease save money?
- Ordinarily you’re committing to more solutions via an Operating lease rather than the first of 3-4 annual purchases of screens and therefore volume discount applies.
- No maintenance costs for 4-5 years on older equipment
- Huge power savings relating to touchscreens versus whiteboards and projectors etc.
What’s the true costs involved and how do they work?
- Operating lease rentals give you the ability to stay up to date with the newest technology. For instance, on a 3 year Operating lease agreement you have the option to return the screens to the bank and upgrade to the newest technology. If you wish to keep the screens for another year, the old rental is discounted by 35% for the fourth year.
- Interest rates are low as Schools are deemed to be low risk.
- The true cost of leasing is the total money spent over the products use / warranty minus the discount, minus the maintenance costs minus the power savings.
A scenario and some financial facts:
- The School wishes to buy 12 screens over 4 years based upon purchasing 3 screens outright per annum. Their purchase price for 4 screens is £2100 each x 4 years = £25,200
- Should they use an Operating lease and commit to all 12 screens at once the purchase price per screen is reduced to £1900 each. The total purchase price (eg what we would invoice the lease Company for) via an Operating lease is £22,800
- There will be no maintenance costs if an Operating lease is chosen. As older front of class solutions age awaiting replacement it is estimated they cost an average of £50 per room per annum. Based upon replacing old with new x 3 per annum over 4 years these costs would amount to £450 + £300 + 150 + £0 = £900
- It is proven that a 65” Touchscreen will use over £110 per annum less in power per class than a projector, whiteboard and sound system. Assuming a gradual roll out via a purchase was decided upon as oppose to an Operating lease these additional power costs would amount to £990 + £660 + £330 + £0 = £1980
So in summary:
If the School purchased 3 screens per annum their total cost of running 12 classrooms over the 5 years would be :
- £25,200 + £900 + £1980 Total = £28,080
If the School used an Operating lease to purchase 12 screens outright :
- 12 x quarterly payments of £1850 Total = £22,200
- 4 x quarterly payments of £1200 Total = £4,800
- 1 x Admin continuous rental Total = £150
- Overall total cost of leasing Total = £27,150
Hopefully the above illustrates why so many Schools are adopting an operating lease for their classroom solutions.
We’d love to discuss this further with you, put you in touch with Schools in your Region that have chosen to use an Operating lease and give you some numbers for internal discussions.
We make £0.00 from encouraging our customers to use an Operating lease from our chosen finance partner. We make £0.00 when they choose to do so.
Thanks for taking the time to read this, I’m hopeful it made sense and is of some use to you.
Chris Birks, Managing Director
If you would like to find out more please contact us on:
T: 01480 810405