Capex to Opex: “No one buys company cars anymore”

In the case of vehicles, renting or leasing are already a matter of course: Most companies lease their fleet today. In addition, the proportion of long-term rentals and other rental models for company cars is steadily increasing. The option to buy is not as popular with entrepreneurs anymore.

There are good reasons for this, such as reducing investment costs (capital expenditure = “Capex”)—which also fully apply to the acquisition and provision of smartphones. For many companies, it makes sense to shift these costs to operating costs (operational expenditure = “Opex”).

“No company buys a company car anymore.
So why should companies buy their smartphones?”

Alexander Ziegler, Managing Director Finance and Accounting, Everphone GmbH

If you want an overview of the tax and social security advantages of renting devices, we recommend you talk to our experts.

Smartphone rental: How it works

In principle, renting a smartphone works like any other rental: The lessor provides a smartphone to the lessee for a specific period of use. However, contract periods are not necessarily fixed—as is common with a rental purchase subsidized by a mobile phone provider through the tariff—to rental durations of 24 months.

In our service, contract durations can be designed more flexibly. Due to the rapid technological advances in smartphones, tablets, as well as laptops and notebooks, durations longer than two years are not recommended anyway.

Smartphones are becoming increasingly important in companies in the era of mobile work.
It’s worth it to calculate and compare different acquisition and expense models.

Avoiding high initial costs with “Capex to Opex”

The biggest advantage is obvious: Companies avoid the initial purchasing costs when they rent the devices instead. For the Android flagship models from Huawei, Samsung, or even Blackberry, prices quickly reach the high three-digit range. And for newer Apple smartphones, depending on the configuration, the pricing is well above 1,000 dollars.

When we talk about hundreds of business devices—or even thousands—, substantial sums accumulate. Therefore, there is the potential to significantly reduce costs.

Depending on the number of company phones, it can already make a noticeable difference to the company’s liquidity whether the devices are purchased (= Capex) or rented (= Opex). For companies that want to reduce capital tied up in fixed assets, “buy and rent back” (BARB) can therefore be an interesting option.

Increasing liquidity, adjusting accounting

If you want to equip employees on a large scale—in the enterprise sector, this quickly means hundreds or even thousands of devices—with smartphones, the corresponding balance sheet often causes head shaking in management and stunned silence in finance: Who is going to pay for this?

Managing company phones has not only technical and data protection aspects but also financial ones.

Even outside of large corporations, such as in SMEs, educational institutions, foundations, city administrations etc, the acquisition costs of ever more expensive smartphones are a real hurdle.

Read our case study on the Erkelenz city administration: https://everphone.com/en/case-studies/erkelenz-city/

When cheaper hardware suppliers then get into the negative headlines due to lacking or dubious security standards, as has happened with espionage accusations against the Chinese manufacturer Huawei, one tends to prefer devices from the two market leaders Apple and Samsung.

Here, the infrastructures are already mature and proofed. But that also costs more. Some typical reactions from management and executives are then:

1. The whole company smartphone project will be postponed.
2. The project will be modified so that only certain employees get a company device at all, e.g. in sales and management. This naturally always causes discontent among other colleagues.
3. Employees are only offered a limited portfolio or are even required to get a specific phone. Then they have to grit their teeth and get through their professional life with an entry-level model.

Shifting business phones from Capex to Opex: Rent instead of buy

Meanwhile, it’s just as easy to rent company smartphones and tablets. Buying or renting doesn’t only make a difference in terms of creditworthiness, but also in terms of accounting. The keyword here is: Capex-to-Opex shift. This refers to the transfer of capital expenditures to operating costs, which can mean considerable tax advantages.

If you have any questions about this, we’re very happy to talk to you.
Simply arrange a non-binding appointment for an Everphone consultation here.

“Buy and rent back”: Sell and rent back existing smartphone fleets

The philosophy of Everphone is to maximize the benefits of renting while offering the users of those devices much higher flexibility in terms of cancellations and hardware upgrades.

That’s why we buy existing smartphone fleets from companies and then rent them back. This approach is what we call “buy and rent back” (BARB).

Initially, this is a transaction purely on paper. However, companies can immediately increase their liquidity and adjust their accounting—while simultaneously enjoying Everphone’s services, such as a 24-hour replacement for defective devices.

With us, employees can upgrade or switch company phones within a predetermined selection. This distribution model is called “choose your own device” (CYOD). It provides employees with a strong connection to the company (good for your employer branding) right from onboarding, and incidentally, the opportunity to opt for high-end smartphones from the premium segment.

Through employee co-payments, employees can also contribute to the rental costs for premium mobile devices. This way, the company maintains full cost control and is not charged beyond a previously set amount.

Options with gross salary sacrifice are also practical for employees: This way, even less is deducted from the net salary.

How companies save with CYOD, employee contributions, and salary conversion

In our experience, employees are willing to contribute a few dollars (from their gross salary, mind you) if it means, for example, getting a brand-new iPhone with a high storage configuration instead of an older iPhone. Otherwise, employees would have to pay well over a thousand euros for the same device—and that would be from their net salary.

Renting mobile phones relieves IT and administration

Besides the employees themselves, as mentioned, finance and HR departments also have reason to rejoice. But the biggest beneficiary of company phone rental is probably the IT department.

With a clever solution like that of Everphone, there is a permanent and noticeable relief, both in terms of device management for business phones and in terms of efforts in mobile device management. Security issues and data protection within the framework of GDPR are also covered.

Full cost control thanks to rented company phones

The monthly fixed costs for mobile phone rental are easily calculable for companies.

Additionally, in the case of gross salary sacrifice by the employees, staff costs are also reduced. On top of that, social security contributions decrease due to the salary sacrifice in this scenario. Although this is not much per device, it’s a nice little cherry on top.

“Buy and rent back” is a win-win situation

Overall, switching to renting your business phones and tablets is a real win-win situation: On one hand, employee satisfaction and productivity increase, and on the other hand, companies don’t have to spend more money.

On the contrary: When including the operating costs for purchasing, setting up, and managing mobile devices by the office management, procurement, and IT department in the balance sheet, companies can even save up to 30 percent of smartphone costs when renting devices.

Rental devices save money and the environment

When the life cycle of a device ends or it is returned for another reason, it is refurbished in the Everphone repair shop and resold. Due to the good price stability of high-quality smartphones, we can make our margin here.

And finally, even the environment benefits from the longer, i.e., more environmentally friendly, usage periods of the devices. The keyword here is: Circular economy. That’s also not bad for social responsibility and sustainability reports. And of course, for the environment.