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Leasing’s Different When It’s Laptops by Joe Auer

Laptops are increasingly used in today’s mobile workforce computing environment, and in corporate America, a good percentage of them are leased. Many laptop lessors start with a traditional lease originally drafted for mainframe leasing and try to make it work for laptops. But watch out! There are 10 traditional leasing provisions that should be treated differently with laptops. Neglecting to make these changes can make it difficult to live up to the letter of a laptop lease and can even technically place you in default of a leasing agreement. To avoid ugly complications, ask your lessor for contract changes regarding the following topics:

  • Relocation without approval. Laptops can move around an organization and the world, so it’s essential to get rid of the lessor’s right to approve a location change.
  • Equipment tagging. Lessors want you to tag the equipment with their ownership labels and usually provide the tags after the equipment has been distributed. But it’s an enormous effort to send the tags to all of the equipment users, ask them to affix the tag and verify that the task has been accomplished. Don’t agree to it.
  • Lessor inspections. Inspections are an administrative nightmare. Your lease was based more on your credit-worthiness than on the equipment’s value. Inspecting a mainframe in a glass house is one thing; inspecting hundreds of laptops is unrealistic. Don’t do it.
  • Defining “acceptance.” Laptops generally require some initial configuration and inspection work, which may be outsourced or performed in-house. Nevertheless, acceptance, or lease commencement, should begin only after configuration, not when the laptop is shipped.
  • Risk of loss. Decide who bears what risk and when. It’s more complex than the mainframe deal, where the manufacturer (or lessor) ships and you receive. Here, there could be two risks. Risk No. 1 occurs when the equipment is shipped by the provider to the configurator. Risk No. 2 occurs when the configurator ships the equipment to your users. If the lessor uses a configurator, get the lessor to bear the first risk and the configurator to bear the second.
  • Taxes. Laptops are considered personal property and are therefore taxable by your state and possibly your local government. The lessor, as the owner, pays the taxes, and you reimburse him (it’s called a net lease). Make sure you get copies of the tax bills and verify that they’re correct. The other tax issue is location; the location of record should be where the laptops are used most.
  • Replacement in kind. Laptops get lost and damaged. Having to return a machine with the same serial number (as many leases require) isn’t practical because of the potential of loss.

Moreover, when you send a laptop off to a central repair facility, you may not even get the same machine back. Secure the right to give the lessor a laptop of the same make and a comparable model with a similar configuration, without being tied down to the same serial number. If you don’t have this right, you may wind up eating an expensive loss.

  • Software. All laptops come with the operating system and desktop applications preloaded by the manufacturer. If the lease cost includes the software, make sure you have the right to use it beyond the end of the lease.
  • Cleaning the hard drive. You may place additional software on the laptop’s hard drive and thus leave a lot of your firm’s information there. Get a warranty from the lessor that it will clean the hard drive when you return the equipment. You should perform this function yourself, but logistics sometimes make it difficult.
  • Upgrades, trade-ins and other options. Because of a laptop’s usage characteristics and short life, it’s unrealistic that a lease will run to the end of its term.

Therefore, adequate provisions must be negotiated to trade in or upgrade the equipment during the term. Evaluate your needs and negotiate for flexibility. Having to buy out the lease or pay early termination charges can be costly.

We’ve all discovered that the laptop world is different. Now we must ensure that our lease deals reflect the realities of laptop life.


JOE AUER is president of International Computer Negotiations Inc. (www.dobetterdeals.com), a Winter Park, Fla., consultancy that educates users on high-tech procurement. ICN sponsors CAUCUS: The Association of High Tech Acquisition Professionals. Contact him at joea@nulldobetterdeals.com.

Copyright by Computerworld, Inc., 500 Old Connecticut Path, Framingham, MA 01701. Reprinted by permission of Computerworld.

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