Leasing equipment for schools

What to consider to ensure you get the best value for money and a compliant lease agreement for your school.

There are some important things to think about before signing a lease. This guidance highlights what schools and academies should think about to get the best value before entering into a compliant agreement.

You can also download a checklist for leasing equipment to guide you through the types of information that a supplier should provide before signing a lease.

Top tips for leasing

  1. If you are happy with your current lease or equipment arrangements, it may be more cost effective to consider extending the lease rather than signing a new one.
  2. Know what your requirements are and ensure you do not pay for features you do not need.
  3. Remember to take your time, a genuine supplier will work with you to make sure your needs are met.
  4. Do not add a settlement cost to a new lease.
  5. Always ask the supplier to provide the proposal in writing to show what was agreed.
  6. Do not sign any paperwork until you have the written proposal from the supplier and you have understood the commitments.
  7. Do not be rushed into signing anything – there could be expensive long-term consequences.
  8. If your supplier is unwilling to provide any information you ask for, this is a good indicator not to proceed with them.

Decide what you need

Start with what the school needs:

  • make a list of the features you will need from the equipment
  • be aware of how often you might use the equipment, for example, if you are leasing a photocopier, you will need to know how many black and white copies, or colour copies are made each year

Compare leasing with buying

For some schools, buying outright could work out better in the long run. Compare the cost of buying the equipment with leasing, consider:

  • any discounted prices
  • prices excluding VAT
  • the cost of maintenance

Costs of leasing

Consider what costs are involved, including:

  • the total cost of the equipment excluding VAT by adding up the monthly payments and money paid upfront
  • the level of discount you’re getting against the manufacturers recommended retail price (MRRP), discounts should not be less than 60% as dealers can pay as little as 20% to buy the equipment. You can typically get 70% to 80% discount using the Crown Commercial Services framework
  • if software updates are required and what costs are involved
  • any documentation fees
  • any annual facility fees
  • the service cost, this is usually fixed for the lifetime of the agreement
  • the cost of any existing leases that needs to be settled (you cannot add a settlement cost to a new lease as it can involve interest on that sum over the new lease period, which becomes a finance lease, and this could represent borrowings which are not allowed under DfE rules without permission – get advice from your auditor)

Types of leases

If you choose to lease your equipment, you can only enter into an operating lease. Financial leases are often poor value so make sure you always follow your school’s procurement rules.

Looking after equipment on lease

You’ll need to know:

  • the expected useful life of the equipment and how long you want to keep it
  • who’s responsible for maintaining the equipment and the cost of this
  • who’s responsible for insuring the equipment, and what liability would be incurred if the equipment is lost, stolen, damaged, or destroyed

Ending and renewing a lease

Fixed term agreements finish at the end of the term. If you need to end an agreement early or want to renew, you’ll need to be aware of:

  • options for renewal, what the terms are and how to do this
  • what you’ll need to do when the lease comes to an end and if there are any costs
  • who’s responsible for returning or disposing the assets at the end of the lease
  • the residual value of the equipment – you could consider negotiating a new lease based on this value for a shorter 12 to 24 month term, provided that it still meets your needs (the cost of the service agreement could increase slightly as the machine will be older)
  • any costs or penalties incurred to end the lease early and how to do this
  • any notice that needs to be given at the end of the primary lease period without penalty, or what happens if notice is not given – you can give notice as soon as the lease is signed to prevent it from running longer than needed

Beware of suppliers who ask you to continue the lease without revisiting the agreement or providing new equipment

Agreeing and signing the lease

Before the agreement is signed make sure:

  • you have a fixed term lease agreement and a separate service agreement so that you can see the true costs of each – these should be signed at the same time
  • the length of both the agreements is for a maximum of 3 years
  • you understand the minimum lease period, this is the shortest period that the school will have to make rental payments for the equipment, and is fixed regardless of changes to the schools needs
  • if you’re being offered a minimum term agreement, negotiate for it to be fixed at an agreed term and sign or initial the alteration, as agreements like these can require 6 months written notice to terminate or it can continue to run, sometimes indefinitely
  • you’ve asked someone else to look over it, this person should be able to provide you with honest advice

Fixed-term lease agreement

Make sure:

  • the lease terms are clear
  • it states the residual value of the equipment at the end of the term as it gives you the option to negotiate a new lease based on this value
  • the costs are clear and a breakdown is included, do not allow costs to be combined, and look out for any annual increases

Service agreement

This should include terms such as:

  • any additional charges
  • cost per use
  • what the fixed costs are
  • how long costs are fixed for (this should be for the term of the agreement)
  • service level response and call out times
  • additional services provided as part of the lease
  • cost of any maintenance or supplies

For advice on legal or accounting matters, get advice from a professional.

Suppliers

Remember that a supplier’s aim is different to yours, so:

  • take your time and do not allow them to pressure you into signing agreements that are not in the interests of the school or academy
  • only enter into a new lease because it’s what the school needs
  • avoid using unknown suppliers
  • if your existing supplier says you need to upgrade then ask them to put the reasons in writing
  • if you want new or different equipment, go through the buying process to make sure you’re getting the best value, before setting it up as a separate agreement

Get quotes

See if you can use a DfE-approved framework to get a leasing deal.

You can also get quotes to buy equipment from suppliers through the DfE-recommended frameworks.

For printers, photocopiers or multi-functional devices, see if you can buy through a DfE-approved multi-functional devices (MFDs) framework.

Checklist for leasing equipment

Download a checklist for leasing equipment showing information that should be provided before signing a lease. This checklist is aimed at helping schools get the best possible value while entering into a compliant agreement.

Using other suppliers

If you prefer to use a supplier that has not been recommended by DfE, make sure you are dealing with a reputable organisation with a proven track record in providing leasing services to schools.

They should comply with the standards set out in the Finance and Leasing Association’s Business Finance Code.

Read Leasing guidance for academy trusts to learn about leasing. The first 5 sections of this guidance also apply to schools.

General guidance on leasing and subscription services for equipment.