Saving Money by Applying Data Science to Equipment Leasing

Michael Watson Ph.D Partner
Read Time: 2 minutes apprx.
data science managerial analytics

Many businesses lease equipment rather than purchase it.  This has tax and finance advantages since the assets are not listed on the books of the lease.  Also, for equipment with a short life cycle- like computer equipment, leases allow you to keep up with changes in technology.   Although IT equipment is probably the most frequently leased, companies also lease other capital equipment.

It is not uncommon for a large company to lease over $100M in equipment and spend millions per month in payments.

Although there are tax and finance benefits of leasing, we have seen that firms don’t really understand the true costs of the lease because of the complexity of the data.

This is where data science and analytics can help.

A large firm could have thousands of leasing documents with many different terms, buy-outs, penalties, extensions, types of equipment, and so on.  If you not systematically analyzing this data, you could be losing a lot of money.

You should classify every single contract and every single piece of equipment.  Once you have all this data, it gives you the ability to see things you were not able to see before.

For example, with data on every piece of equipment, you can understand the true cost at an item level and make sure you are not paying excessive amounts for outlier pieces of equipment.  By classifying the contracts, you can calculate the true Net Present Value of the contracts and better understand what you should be paying.  By having the contracts in one place, you can avoid excessive outlier penalties incurred when the lease term expires.  And, by looking at all the data, you can put better checks and balances in place and look for suspicious transactions.

On top of managing your leases better, you will get additional value:  you can analyze pricing trends, vendor discount trends, spending and productivity changes by department, and equipment needs.

Analyzing your leases allows you to uncover additional savings.