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Intel's ill-thought leasing scheme

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Update This article first appeared in November 1998 It takes just a few simple questions to establish that Intel knows less about leasing than I do about designing microprocessors. Intel's decision to plunge into the leasing market for its SME resellers could be construed as ambitious. Luckily, Intel has signed up Dana Commercial Credit (DCC), a big shot in lease financing and a former partner of Compaq, to handle the mechanics for its big idea for the channel. Under the banner of Intel Financial Services, the vendor is offering a range of small-ticket leasing options through its 1,500-strong UK channel of Intel Product Integrators (IPIs). Intel is offering both finance and residual value leases and for a cost, users can upgrade systems during the lease term and write off residuals against new leases or purchases. The minimum deal starts at £450 and applications for up to £20,000 can be approved within 20 minutes, Intel claims. No maximum amount has been set, although we can assume this is entirely theoretical. This is a good idea - by sheer dint of size, Intel commands much better finance terms than its IPIs can. System builders are able to offer attractive financing options to customers, enabling them to flog more PCs while offloading financing costs onto Intel and DCC. It's also a good idea for many small business customers who are battening down the hatches in advance of the recession. And as the old saw puts it - buy appreciating assets, lease depreciating assets. Jon Singleton, UK sales director at DCC, says leasing enables businesses to fit computing into tight budgets. "It helps protect against obsolescence, it provides the ability to upgrade equipment while maintaining a predictable payment schedule is a benefit." Leasing is also good for Intel because it gets to sell more chips. Any kit returned reverts to Intel Financial Services - some systems and components will be recycled while others will be channelled through Intel's environmental disposal programmes. But let's say 15,000 PCs are returned each year at the end of their leasing term. Reproduce that across Europe and you're talking 100,000 PCs each year. How are these to be disposed environmentally? How many secondhand PCs can charity and educational establishments soak up, when they are inundated with offers from corporates and other PC vendors? And how realistic is it to break up returned PCs for recycling into the maintenance market? Compared with Dell and Compaq second user kit, the resale value of Intel IPI machines is negligible. Intel returned kit has been assembled by thousands of assemblers, using tens of thousands of different components, to widely different quality standards. Intel does not appear to have thought through the back-end implications of its leasing scheme - the more successful it becomes in writing new business, the bigger the disposal and financial headache it will face down the line. ®

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