Case Detail

Case Summary

Technical Note: Lease vs. Buy Decisions for Technology

Case Number: 7-404-753, Year Published: 2004

HBS Number: KEL263

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Authors: Mark Jeffery; Susan Deutsch; Paolo Cuomo

Key Concepts

Decision Making, IT, Lease Versus Buy, Purchasing Decisions, Leasing Equipment, Lease Rate Factor, MACRS, Depreciation, Equity Insertion

Abstract

This technical note illustrates the fundamentals of lease vs. buy decisions in technology and how they differ from the typical capital equipment lease vs. buy decision. This note is designed for instructors, and provides them with a background for an introductory lecture on information technology (IT) leasing. It can also function as a companion to the Kellogg cases “AMG, Inc. & Forsythe Solutions: Lease vs. Buy Decisions” and “Shilling & Smith Acquisition of Xteria Inc.: Data Center Technology Leasing.”

Learning Objectives

By working through the problem set provided in this note, students will learn how to calculate lease rate factors and how to use them in order to evaluate the benefits and drawbacks of leasing technology equipment.

Number of Pages: 20

Extended Case Information

Teaching Areas: Technology

Industry: Information Technology

Year of Case: 2004