I have been debating whether to buy a new Mac Pro or do the Apple business lease for a few weeks now. Last week I finally pulled the trigger and called the 800 number listed on the Apple site and spoke with a really nice guy who connected me with Direct Capital the company that handles the business leases for Apple equipment. The conversation went smoothly, I was approved for much more money than I needed, which was followed by an email asking me to “Choose my Terms” for credit. In other words 24, or 36 month lease, or the option of 2 payments to buy the Mac Pro out right. Now, here is where things started to fall apart.
A lease as I understand it, (at least with the lease on my car) pays down the deprecated value of the item over the length of the lease. The residual value is what the item is worth if you choose to purchase at the end of your term. In the case of my car, the face value to buy was 25k. The guaranteed residual value that VW has written into my contract is 19k. At the end of 36 months, if I want to buy my car, I must renegotiate a new loan with VW, or pay cash for the 19k residual amount.
Here is where the Apple deal is for lack of a better term “Fucked”. I configured the following system for a 24 month, 0% interest business lease.
Mac Pro no monitor, no keyboard, no mouse. Just the CPU.
- 3.7GHz quad-core with 10MB of L3 cache
- 16GB (4x4GB) of 1866MHz DDR3 ECC
- 1TB PCIe-based flash storage
- Dual AMD FirePro D300 GPUs with 2GB of GDDR5 VRAM each
This is an entry level Mac Pro with a list price of $3899.00. Since I want to lease, I should just be paying the depreciation on the hardware. Since this is 0% interest loan on 24 a month lease, my payment should be pretty straight forward. 3899.00 plus tax divided by 24. Lets do a little math.
Lets do a little math.
$3899.00 times 0.07 cents in sales tax equals $272.93 in taxes. $3899.00 plus $272.93 equals $4171.93. $4171.93 divided by 24 months equals 24 payments of $173.83, assuming that the value of the system at the end of the lease is $0.00. That’s right assuming that the hardware has no residual value at all after just 2 years.
If the Mac Pro is as good as Apple claims, I would think the residual value would be at least 30% of the $3899.00 sticker price. That is $1169.70. So really my lease payment should be around $125.00 a month for 24 months coming to a total of $3002.00. Not perfect, but still cheaper than the purchase price of $3899.00. I could save close to a grand if the lease is structured with the hardware maintaining some residual value.
The problem is that when I ran the payment calculator on the “Select Your Terms” page I got a payment of $171.00 dollars a month. This adds up to $4617.00 in payments over the 24 month term of the lease, meaning the Mac Pro has a negative residual value of $718.00. That’s right if I lease, a Mac Pro I end up paying $718.00 more than the value of the system if I just bought it outright. The thing that really chaps my ass is the fact that if I turn the computer in at the end of my lease, just like I would with my car, Apple, or Direct Capital is going to take it, resell it and make additional money.
Then there is the end of lease agreement. Like a car, when you turn the item in, there is a processing fee that gets billed to you. The leasing company uses this as an incentive to get you to roll into a new car, computer, or other item that they offer. The objective is to get you to lease a new item, continue to pay them and stick with their program. To do this they often wave the end of lease fees, and other associated costs. The problem that I have with Apple and Direct Capital’s lease structure is that you, the leaser will just continue to dig a deeper financial hole because you will still be paying more than the face value of the system over time.
So, at this point I called my accountant and asked him for some sage advice on the matter. This is what he told me.
“You’d be better off to buy a system with 24 to 36 months of differed interest. Pay it off before the end of the interest terms are reached, and when you need a new computer, sell the old one and use that cost to offset the purchase of the new system. You can deduct some of the initial purchase costs from your taxes the first year since it is a purchase for your business, and in the long run you aren’t getting screwed by a lease agreement that seems a little stacked against you.” This was the paraphrased version. My accountant likes to talk. You get his point though, and so do I.