1. Archive

Dell opens window on leasing

Jason Westrope faced a familiar problem for many computer shoppers: He wanted a new computer but couldn't afford the $4,000-plus price tag.

His solution: lease, don't buy.

"I was going to get a computer one way or the other," Westrope said. "When I found the lease program, that pretty much sealed the deal."

Taking a page from the auto industry, Dell Computer has started a lease program for home users. While a number of companies lease computers to business users, Dell is the first computermaker to offer such an option for home PCs.

Consumers sign a two-year lease and pay the first and last month's installments up front. They have the option at the end of the lease to buy the computer, based on a blue book value, or return it. Total costs are slightly higher than if someone purchased the machine outright.

For Westrope, that meant monthly payments of about $190 instead of about $4,500 out of pocket immediately. "For that money, it's a pretty good deal," said Westrope, 29, of Tampa.

Westrope, who does urban design and architecture work as well as teaching, says one factor in his decision to lease was a concern that the Pentium II chip was going to become obsolete. He doesn't plan to buy the system at the end of the lease.

"I have had other computers, and after three or four years, they're useless," Westrope said.

Lease customers can have their systems customized, just as people who are buying. Taking an example from a recent ad, someone can lease a 233 megahertz Pentium MMX computer, with 32 megs of random access memory, 3.2 gigabyte hard drive, 24 speed CD-ROM, modem and monitor for $102 a month for two years, or buy it upfront for $2,299.

Dell says it started the program this summer because that's what its customers, concerned about system obsolescence, said they wanted.

"We're targeting especially the repeat home PC users," said T.R. Reid, Dell's corporate public relations manager, people "who are going to be turning over their system, who want the latest and greatest, the fastest chips and the most robust configurations available, who use computers in such a way that after a few years they're worried some of the new applications might not run as well (on an older system)."

Initial reaction to the program has been good, Reid says. While no other computermakers have followed Dell's lead on leasing, Gateway and Micron are considering the move, according to published reports.

Neither CompUSA nor Best Buy plans a program similar to Dell's for home users, according to representatives for the retailers.

"I don't think there was an expectation that leasing would necessarily revolutionize the computer leasing business," Reid said. "It's an additional option for people looking for a home PC and looking for a Dell."

While leasing for home use is new, leasing for business use is not, with computermakers and local companies offering the option.

Several companies in the bay area offer computer leasing, with most of their customers being businesses and most of the rentals weekly or monthly, according to a spot check by the Times.

Ian Renton, co-owner of the PCR Personal Computer Rental franchise in Tampa, says the bulk of his business is what he calls the transient market for short-term rentals: events at hotels and convention centers, training classes and meetings, and companies that hire temporary workers for special projects.

Renton said that's a reversal from when he opened the business 13 years ago, when corporate leasing accounted for about 80 percent of his business.

A few individuals do rent from him, Renton says, including people who are taking professional classes or exams, such as nurses and pilots.

The short-term rental fees are more expensive than Dell's monthly installment. At PCR, for example, Renton says, people can expect to pay, on average, 10 percent or more of a computer's cost as a monthly rental fee. For a $2,500 computer, that would mean $250, not including any preparation charges.

While no other companies have yet joined Dell in offering consumer leasing, at least one analyst says the idea may catch on.

"I can think of a lot of consumers who would be interested in a leasing program," independent analyst Richard Zwetchkenbaum of Marlborough, Mass., told Computer Retail Week. "A first-time buyer may want to test the waters, or users may just want to refresh their system every two or three years."

In its ads, Dell focuses on the obsolescence issue. "How many companies will let you return your computer when it becomes obsolete?" one headline reads and, in smaller type, "Introducing Dell's personal lease which protects you against obsolescence."

Dell is not concerned about disposing of the computers turned in after two years, Reid says, because of a good market for older, complete systems. "Those systems live on in various forms," he said.

Mike Bell, a Dell customer from Tampa, says he is unsure about purchasing the system he leases for $119 a month. That will depend on advances in technology and whether a new system will be substantially better than this one.

"It's kind of like my toy," said Bell, who teaches at New Horizon Computer Learning Center. "Bigger, better, faster."