Obviously, tax laws have a strong impact on business decisions. We never lease for personal purpose because the interests are not tax deductible.
Well, not quite true. There are definitely some places that sell computers on a "rent-to-own" or "lease" basis to individuals. These days, many of those seem to be poor quality computers designed to prey upon the poor though.
Computer hardware is often leased because the full amount paid is tax deductible. When I was an undergraduate student, for tax purpose, computer hardware was depreciated 30% per year , this is, 30% of the actual value was lost every year. Purchasing hardware is a large expense, but corporations can only deduct 30% of it the first year. So, a $10,000 purchase would have a legal value if $4,900 after three years. I you auction it for more, it is a taxable income, if you auction it for less, it is a deductible loss.
Suppose that you keep it for 10 years, something I have done numerous time with client PC, it would have a legal value of $403,54. After 5 years, you would have deducted $8,319 and you would have little incentive to keep it.
So yes, and here in the US, the cycle is that at the end of an 3-to-5-year lease, the gear is returned to the leasing company, parts'ed up, and then sold on fleabay or via other "refurbished" PC sources.
But the incentive to keep it is that the cost-to-replace is substantial. For example, we just picked up a bunch of off-lease HP 8300 Elite's for $125/ea. 4GB RAM, i5-3470 CPU, 250GB HDD. So first off, if we were to build a new Windows desktop, I can't even *just* purchase the Win10Pro license for that price, much less buy the parts. Ironically I was told that Win7-licensed desktops were being returned at end-of-lease because the replacements would have Win10. Gobsmacked, we bought some of these, licensed for 7Pro, I shot a Win10 DVD in them, updated, pulled the disk and put in an SSD, reloaded, and Win10Pro auto-activated perfectly. I can't buy the damn LICENSE on its own for the price.
Now, the thing is, these are probably being replaced at wherever they came from with something like the EliteDesk 800 G3 (i5-7500, 8GB DDR4 2400) which goes for around $750.
According to
benchmarks, the new box is around 19% faster. But still comes with a fricken' hard drive. So if I really needed that last 19%, maybe an upgrade, but also maybe just also swap in a refurb i7-3470 CPU that is spec'd to work in the older system.
A case study that was used for University teaching shows that a corporation was still running on PC-XT and PC-AT when Intel 80486 were widely available. The reason, they have purchased that stuff (and remember, a PC AT costed $10,000 at the time if its introduction) and they have to hold on it as long as it is a good source of tax deduction. Disgruntle employees saw their productivity greatly reduced by the obsolete hardware, but they were not the one with the power to change things.
Well that's a reasonable call to make from the era of revolutionary speed increases on a nearly yearly basis. I talked about that upstream:
Going capex and writing it off as a sec 179 has gotten better over the years as
Congress has used continuing 179/raising the 179 limit repeatedly as a way to encourage small business investment (reduce tax revenue?) But even without 179, 5 year depreciation is pretty reasonable. The 179 thing only works for small businesses. The thinking for bigger companies seems to be that they got a bit spanked during the 90's and 00's with the rapid growth of computing power, and that they'd prefer the shorter commitment, but that they just haven't noticed that has mostly failed to be compelling in the last ~8-10 years.
The thing is, as a small business owner, I am also a technologist, so I both look at the hardware to buy and sign the checks. So I don't see reason to sell hardware we bought three to five years ago just because it is three to five years old. In many cases, I'm actually happy to buy someone else's used stuff at a steep discount because it so closely resembles what we'd buy today new.
PC's - discussed above.
LSI RAID controllers. The go-to for a local RAID on an ESXi host is something like an LSI 9271CV-8i (~$700) or 9361-8i+CV (~$800) but people are hesitant to pay that. In 2016 I had a customer buy a system with a 9341-8i (~$300) HBA because he couldn't stomach the extra $500 and didn't think he needed the performance. Last year, he came back for another system, and I had been cherry-picking $125 9270CV-8i's off eBay, and I told him I could sell him two used and tested 9270CV's for less than the cost of an HBA, and they'd be super-turbo-faster. Sold.
Network controllers - the X520-SR2's for $150 ... amazing.
Businesses are discarding these items and then buying a similar item to replace it. So a LOT of what I'm seeing isn't the XT-to-486 thing. It is not knowing the difference, and getting rid of perfectly usable hardware anyways. I would rather hold on to gear until there was a compelling argument to replace it.
I don't know how it works up in the Great White North, but down here, you can do what's called a "section 179" that allows you to deduct the cost in the first year. It has recapture rules that are similar if you sell the gear before the end of when it would have depreciated. Even before that, I know that some businesses just warehoused gear that was underperforming to deal with the XT-to-486 type issue. The taxman can't force you to *use* the gear.
So if you look at it from that angle, if a business is still using XT's when 486's are available and would be a good upgrade to make, they're just a stupid business for the productivity, employee happiness, etc., reasons you mention. Take the crap, throw it in a closet to live out the depreciation, and buy new crap.
I'm more interested in the opposite behaviour, which is getting rid of perfectly decent gear because of business practices that are effectively wasting money. I don't mind a big capex investment that will pay off over the years.
