Get the facts

CLAIM: HP recently announced two new zero percent technology financing programs for small businesses.

Here’s the Catch…
Zero percent financing might get your attention, but it may not be the best financial decision, especially for small businesses strapped for cash.

HP is offering two financing products specifically targeted at small businesses in the US and Canada:

• A "zero percent" 12-month financing option on selected hardware that would allow businesses to spread payments over 12 months and then purchase the equipment for 1 dollar at term end.
• A "zero percent" 36-month lease offer on selected hardware that spreads payments over a longer period, but assumes customers will return the equipment at the end of term.

In its press release, HP says that the zero percent 12-month promotion plan "allows small businesses to invest in new technology while managing cash flow." The catch is neither of these plans provides customers the best alternative for actually managing cash flow when they acquire hardware.

"IBM Global Financing – a higher-value partner"

The zero percent 12-month plan simply divides the purchase price of the equipment by twelve. It is really a full payout loan. While this offer is preferable to paying the full purchase price up front and may therefore appeal to certain buyers, there are several other financing options that would provide small businesses far greater ability to invest in technology while managing cash flow.

The program fails to provide any of the benefits of true leasing including:

1. Allowing the customer to pay for the value they use -- not the full purchase price.
2. Transferring equipment and liability risks to the financier.
3. The opportunity to upgrade equipment in mid-lease.
4. Building a regular technology upgrade/refresh cycle
5. The opportunity for favorable tax benefits

Similarly, HP’s zero percent 36-month lease is no bargain when you consider that at the end of the lease term, the customer has to return the equipment that they have already paid for in full. In fact, if the customer decides to keep the equipment, it must purchase it for the then-fair market value (meaning the implicit interest rate of the transaction is no longer zero.)

Read the fine print in the HP offer:
Businesses only get the benefit of the 0% implicit lease rate if they return the equipment, which they have already paid for in full. That monthly lease payment might seem low, but it’s no bargain when you consider that, at the end of the lease term, you’ll have to return the equipment that you’ve already paid for in full.

IBM Global Financing’s low rates equal lower payments than HP’s 0%

IGF offers qualified customers competitive rates for IT financing. Period. When clients lease through IBM Global Financing at our ongoing low rates, payments - and the total cost of leasing - will actually be lower than so-called 0% leases (see example below).

In fact, depending on the size of their IT investment, clients could easily save thousands of dollars over the term of the lease compared to an HP 0% lease! With a fair market value (FMV) lease from IBM Global Financing, clients only finance the difference between the original purchase price and the residual value (i.e., projected value of the equipment at lease-end)– not the full cost of the equipment.

IBM Global Financing clients still have the option (but no obligation) to buy the hardware at the end of the lease term at its fair market value. However, 1) they would not have already paid the entire purchase price and 2) they would have saved money with each monthly payment.

The Bottom Line: We’ve seen this story before. Don’t be fooled by 0% promises. Compare the numbers and see there are absolutely zero reasons to choose anyone other than IBM Global Financing for Full Market Value Leases.

For more on IBM Global Financing, click here.