With design cycles being cut in half and designs requiring faster test equipment with higher operating frequencies and greater bandwidths, savvy designers and engineering managers should be giving leasing (versus buying) a second look, for many reasons, but we narrowed them down to 10.
To get a bead on the topic, ED had a quick chat with Microlease, a test equipment management company that for three years straight has won the Frost & Sullivan Company of the Year award for “Best Practices in Global Test and Measurement Rental and Leasing Services.” We figured if anyone would have a handle on leasing, it would be these guys.
We got a bit more than we bargained for, including some ideas on how to evaluate a leasing company and some of the “gotchas” involved.
According to George Acris, director of marketing at Microlease (Europe), the application and integration of electronics into almost everything you can imagine, thanks in great part to the Internet of Things (IoT), has contributed to an increase in the interest in leasing test equipment, as test of electronics isn’t a primary focus of some of these customers.
In general, however, the concept of leasing or renting is better understood in the U.S. than in Europe. “In Europe it’s growing,” says Acris. “The default is, you need it and then raise money and buy it, but that’s changing quickly.” He sees more and more companies getting savvy about understanding usage and deploying test equipment.
With stock piling, you need to find a piece of equipment and then it could be out of calibration.
But that’s just one of many trends and factors. David Sherve, VP for marketing and product, management for the Americas, pointed to another: Thanks to the historically low federal borrowing rates, you may also get a really good deal.
If you do decide to look at leasing, Sherve suggests finding a company that is an expert in equipment and has extensive inventory. “You need a rapid response if you have an issue with a product introduction,” he says. Good point. You also need to know that the company can provide the training and know-how that only comes with experience.
That solid background is helpful up front, too: If you call and rent a network analyzer, “you may not think to ask for the cables, connectors, cal kits [calibration kits], and other support,” says Sherve. “And then you’re stuck. It could take another week to get them.” Not good when the clock is ticking and the customer’s waiting. A good leasing company would know to either ask if you had those, or if you needed them.
Some companies may also play the “gotcha” game, in that they don’t notify you when the lease is up, but instead keep charging you. "Some customers get really frustrated,” says Sherve, “not realizing they may have been paying for it for a year and a half [beyond what they expected originally.]”
Maybe it’s a sign of why Frost & Sullivan gave Microlease the award, but “we tell customers when the term is up,” says Sherve. He estimates that companies that don’t notify may make 25% more revenue than Microlease as a result, but Sherve puts higher value on a satisfied customer.
Another thing to look for in a leasing company is global coverage. You might have mirror sites doing design in various parts of the globe, so a good distribution network is critical to ensure you get the equipment on time and with good backup service.
Anyway, here are the top 10 reasons to consider leasing versus buying:
1. You realize that most test equipment is actually in use for only 15% to 20% of its working life span. That statistic in itself can make you reconsider purchasing.
2. You don't have capital equipment budget, but need to test your device immediately.
3. Timespan: How long do you need it? Is it just for a quick evaluation? Two weeks is a rental, but as you get into six months or a year, consider “rent-to-buy.” It all depends on the situation, but one week is the minimum rental period. Note that with rapidly advancing technology, odds are that the advanced test equipment you need now will be obsolete within one or two years.
4. You own a lot of that unused test equipment lying around, have no money, but need the latest equipment now. You can sell that equipment to the leasing company and raise the cash to rent the latest and greatest. If you just need cash, you can sell the old equipment and lease back what you need—at a low monthly rate.
5. You want to tie the expense related to test equipment to specific contracts and thereby charge your customer accordingly.
6. You want to try expensive equipment for longer than an OEM will allow you to demo the equipment before you purchase it.
7. Your funding and/or need for the equipment in question is uncertain.
8. Good lease deals—for now. In the U.S., the federal borrowing rates are still historically low, so you can still get a good deal. Sherve estimates that a network analyzer from Keysight would rent for 2.5% to 3.5% of list price per month, if you don’t need it highly configured. The more custom and highly configured you make it, the harder it is to re-rent the equipment, so your monthly cost goes up accordingly.
9. You design on the “bleeding edge”—and ahead of the competition. With cars it’s just plain fun to always be in the latest and greatest, but with test equipment it can make or break your competitive advantage if you cut corners here. It all depends on the application, of course.
10. No more calibration and maintenance worries. Or costs. The leasing company does all that for you. Also, if something changes you can get upgrades and support. Besides removing the headaches, leasing can save up to 25% or more, says Sherve, noting that “it’s not just the purchase but also ownership, calibration, repairs, storage, and management.”
If you do lease and don’t have a CAPEX budget, you may be tempted to “innovate” and put the rental into the OPEX budget. Be careful. You will run afoul of accounting —and the IRS. Watch that.
“If you’re working with a good company, you will find out if it’s a capital lease or not,” says Sherve. That company can fill you in on the nuances. “Make sure it passes [the four] OPEX lease requirements.”