Customers who haven’t been properly introduced to leasing tend to view it as a sort of never-ending treadmill—lease, return, lease, return, and so on. Jump off the treadmill after a lease ends and what do you have? A big dusty space where a piece of equipment used to sit. Unless, of course, you start the cycle all over again.
In this customer’s mind, a lease means he’ll pay and pay and pay and never own a thing. “But if I buy,” he thinks, “I’ll have an asset I can use after the last payment’s made. And I can sell it, if and when I need to and put the proceeds toward new equipment.”
For some kinds of equipment, that logic holds up. But not always, particularly if a customer’s buying technology that hasn’t sufficiently matured to warrant making a long-term commitment.
Mature vs. Immature Technology
Everything made by humans, no matter how simple, is technology. But some technology is so mature—so refined—that we don’t bother calling it “technology” anymore. Take fire, for instance. Or a hammer—that technology matured a long time ago. Not much R&D goes into hammer technology these days. Not much change, either. So the hammer you buy now is a hammer you can use just as well a century from now, assuming nails still exist and superintelligent robots haven’t turned us all into house pets. This is one of the reasons you won’t see many hammer leasing agreements.
Another thing about hammers: they’re usually pretty inexpensive. Mature technologies tend to be cheap. Commodity cheap. Race-to-the-bottom cheap.
But what about the technology your customers are buying from you? How mature is it? How inexpensive is it? Chances are, the equipment you sell changes all the time. It’s probably not what anyone would call cheap. And those are two reasons it’s a great candidate for leasing.
The Magical Device That Suddenly Wasn’t
Remember the original iPad, released way back in 2010? How cool and revolutionary it was? How “magical,” to use Apple’s word?
Remember a year later, when the iPad 2 hit the shelves? Just a few months after legions of people got the original iPad for the holidays?
The collective worldwide groan from owners of “old” iPads could probably be heard by astronauts orbiting earth aboard the ISS. It could certainly be heard in Cupertino.
But technology marches on, at least if it wants to keep being called “technology.” And as it does, it leaves a wreckage of rapidly devalued assets in its wake. Sure, the original iPad had value still, after the advent of the iPad 2. But if you were one of the original owners, wouldn’t you rather have leased the original iPad for a few months and upgraded as soon as the new, enhanced device came out? With just a phone call to Apple? Without having to first unload the now markedly less cool iPad you got for the holidays? And having to weep a tiny bit about how little you got for it on eBay?
Such is the plight of asset owners when immature technology moves toward maturity. If you’re selling technology that hasn’t matured and isn’t what you’d call inexpensive—a good bet, because mature, cheap technology tends to be sold by megavendors with economies of scale to leverage—this is the plight of your customers.
But there’s at least one notable difference between your customers and owners of the original iPad: iPad owners—most of them, anyway—didn’t lose their competitive edge when they couldn’t upgrade to the iPad 2. They may have gotten pitying looks from iPad 2 owners, but that’s about it.
But for your customers, out-of-date technology can be what lets the competition get a foothold—or pull far ahead, never to be caught again. Instead of equipment, it turns out they’ve purchased a boat anchor that holds them down while everyone else sails on by. Of course, it depends on your customers’ industries and their competitive situations, but it really can be that big of a deal. Especially if customers perceive a business is falling behind the technological curve.
Leasing Makes Sense When Change Is the Only Constant
So when a customer mentions that leasing is, to his mind, an endless treadmill with nothing to show for it at the end, it might be worth asking him if he actually wants to own his equipment. Does he want to be saddled with an asset when competitors are taking advantage of constant technological improvement? When competitors can continually reinvent themselves, in small ways and large? When they can turn on a dime, and he can’t?
Buying makes sense in some situations, if you’re buying mature technology and you’re reasonably certain some game-changing innovation isn’t coming along to disrupt everything. But when outfitting a business with technology that’s in flux, leasing can provide some very real, very compelling benefits—benefits that make it one of the smartest and most economical ways of acquiring equipment.