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Software Leasing

What Are The Special Benefits Of Software Leasing?

From the viewpoint of the user, it is just about the same as equipment leasing, except it's for an intangible, the software and the software license. It is a method of paying for software over time instead of a single upfront payment and the functional equivalent of a loan from the leasing company or the software developer. It is normally structured as a capital lease rather than an operating lease. However, it is often accounted for as an operating lease.


Obtain all the licenses that are needed now to supply all users. You have funds allocated in your budget for only some of the licenses you need. You can arrange a lease for all the licenses you need and still be within your annual budget requirements.


Include consulting, hardware, customization, and training costs in the lease. Bundling the individual components of a project in one lease is normally simpler and tends to result in level expensing rather than having some components expensed upfront before benefits are realized.


Include internal implementation costs in the lease where appropriate. You're doing some of the work, like data conversion. These costs also be included in the lease.


You can own the license at the end of the lease without additional payment. In fact, unless you clearly have only a short-term need for the software, you should only execute a finance lease where there are no additional payments at the end of the lease. We think the value of software at the end of the lease is in most cases close to, if not greater, than the value at the beginning. Thus, an operating lease with an option to purchase at fair market value option at the end of the lease will in almost all cases turn out to an expensive proposition..


Correct the failure of many accounting systems to recognize the long-term benefits of software and related costs. A lease will in most cases permit you to better match software expenses with the period of benefit.

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