Purchasing employee laptops in large quantities can seem like a great use of your buying power to score a discount. Many laptop suppliers will start offering discounts from 30+ units. Even if your hiring plans are unclear, you may be tempted to bulk order and store these laptops for use later just to take advantage of a discounted rate.
But this is where you need to be careful. The longer a device sits on a shelf, the more it depreciates in value. So there comes a time when the cost of depreciation outweighs the savings you made by buying in bulk - and it may be much sooner in a device’s lifecycle than you think.
A very standard discount on bulk device orders is 5% off each device. So let’s say you buy 30+ laptops worth US$1,000 RRP, they would each be worth US$950.
By working out the rate of depreciation of a work laptop worth US$1,000, we can get an idea of the point at which a 5% bulk discount stops making financial sense.
Asset depreciation is an accounting method used to allocate the cost of an asset over its useful life, which is the period of time an asset is considered to be productive to a business. Once an asset reaches the end of its useful life, it’s no longer cost-effective to use.
Depreciation represents how much of the asset’s value has been lost over its productive lifespan.
The useful life of an employee laptop is determined by your business, but it is common for laptops to be depreciated over three years. So we’ll be looking at how the value from the initial cost (US$1,000) depreciates over three years.
There’s different ways of working out monthly depreciation. The most common method is straight-line depreciation, where you assume the asset depreciates by the same amount every month.
Another consideration is whether to choose for the laptop to have a residual value at the end of its useful life, in other words, whether you will resell the laptop, or simply use it until disposal.
A laptop that will be resold at the end of its useful life will depreciate at a slower rate than one that won’t be resold, due to the value that you get back at the end of its lifecycle. A laptop that won’t be resold will simply depreciate to US$0 (zero value).
Here’s how a US$1,000 device will depreciate over its useful life, if you don’t resell:
Depreciation to zero residual value
With the value simply depreciating to zero over three years, the device will be worth $0 at the end of its lifecycle, and it will lose 1/36th of its value per month (or $28). As such, the device will depreciate at a rate of 2.8% per month ($28 / $1,000).
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So for the 5% discount to be worthwhile, you need to start using the device within 1.8 months, or 7.7 weeks, of purchase.
Here’s how a US$1,000 device will depreciate over its lifecycle, if you do resell:
Depreciation to resale value
The wholesale/B2B resale value of a device after 3 years is up to the company but as a benchmark, we can assume it is 17.5% of RRP. So for a US$1,000 device, the device will lose US$825 over its lifecycle (or $23 per month). This makes the depreciation rate 2.3% per month ($23 / $1,000).
So for the 5% discount to be worthwhile, you need to start using the device within 2.2 months, or 9.5 weeks, of purchase.
The bottom line: Unless you use the laptops you’ve bought in bulk within 2 months, you’ve canceled out the discount savings.
If you end up holding devices for longer than expected (e.g. your hiring plans slow down unexpectedly), you’ll need to factor other costs into your total cost of ownership.
Out-of-warranty repairs
Most standard manufacturer warranties are one-year long. So if you have a device unused for several months, you are eating into the warranty.
Let’s say you deploy a stored device to a user 9 months into the warranty, so it’s only covered for the first 3 months of their tenure. There’s a high chance that any repairs needed will be outside the warranty period. You’ll either need to extend the warranty, or pay more to sort the issue.
Obsolescence
When hardware gets too old, new software can’t run on it. The device becomes inefficient and a risk for IT security.
Eventually, an operating system stops being able to receive patches. This is also a security concern: 60% of all data breaches are caused by a known, but unpatched, vulnerability.
So leaving devices to sit on shelves for too long can open up further issues that cost a whole lot more than depreciation.
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Purchasing employee laptops in large quantities can seem like a great use of your buying power to score a discount. Many laptop suppliers will start offering discounts from 30+ units. Even if your hiring plans are unclear, you may be tempted to bulk order and store these laptops for use later just to take advantage of a discounted rate.
But this is where you need to be careful. The longer a device sits on a shelf, the more it depreciates in value. So there comes a time when the cost of depreciation outweighs the savings you made by buying in bulk - and it may be much sooner in a device’s lifecycle than you think.
A very standard discount on bulk device orders is 5% off each device. So let’s say you buy 30+ laptops worth US$1,000 RRP, they would each be worth US$950.
By working out the rate of depreciation of a work laptop worth US$1,000, we can get an idea of the point at which a 5% bulk discount stops making financial sense.
Asset depreciation is an accounting method used to allocate the cost of an asset over its useful life, which is the period of time an asset is considered to be productive to a business. Once an asset reaches the end of its useful life, it’s no longer cost-effective to use.
Depreciation represents how much of the asset’s value has been lost over its productive lifespan.
The useful life of an employee laptop is determined by your business, but it is common for laptops to be depreciated over three years. So we’ll be looking at how the value from the initial cost (US$1,000) depreciates over three years.
There’s different ways of working out monthly depreciation. The most common method is straight-line depreciation, where you assume the asset depreciates by the same amount every month.
Another consideration is whether to choose for the laptop to have a residual value at the end of its useful life, in other words, whether you will resell the laptop, or simply use it until disposal.
A laptop that will be resold at the end of its useful life will depreciate at a slower rate than one that won’t be resold, due to the value that you get back at the end of its lifecycle. A laptop that won’t be resold will simply depreciate to US$0 (zero value).
Here’s how a US$1,000 device will depreciate over its useful life, if you don’t resell:
Depreciation to zero residual value
With the value simply depreciating to zero over three years, the device will be worth $0 at the end of its lifecycle, and it will lose 1/36th of its value per month (or $28). As such, the device will depreciate at a rate of 2.8% per month ($28 / $1,000).
So for the 5% discount to be worthwhile, you need to start using the device within 1.8 months, or 7.7 weeks, of purchase.
Here’s how a US$1,000 device will depreciate over its lifecycle, if you do resell:
Depreciation to resale value
The wholesale/B2B resale value of a device after 3 years is up to the company but as a benchmark, we can assume it is 17.5% of RRP. So for a US$1,000 device, the device will lose US$825 over its lifecycle (or $23 per month). This makes the depreciation rate 2.3% per month ($23 / $1,000).
So for the 5% discount to be worthwhile, you need to start using the device within 2.2 months, or 9.5 weeks, of purchase.
The bottom line: Unless you use the laptops you’ve bought in bulk within 2 months, you’ve canceled out the discount savings.
If you end up holding devices for longer than expected (e.g. your hiring plans slow down unexpectedly), you’ll need to factor other costs into your total cost of ownership.
Out-of-warranty repairs
Most standard manufacturer warranties are one-year long. So if you have a device unused for several months, you are eating into the warranty.
Let’s say you deploy a stored device to a user 9 months into the warranty, so it’s only covered for the first 3 months of their tenure. There’s a high chance that any repairs needed will be outside the warranty period. You’ll either need to extend the warranty, or pay more to sort the issue.
Obsolescence
When hardware gets too old, new software can’t run on it. The device becomes inefficient and a risk for IT security.
Eventually, an operating system stops being able to receive patches. This is also a security concern: 60% of all data breaches are caused by a known, but unpatched, vulnerability.
So leaving devices to sit on shelves for too long can open up further issues that cost a whole lot more than depreciation.
Only procure when you need and upgrade your devices when they start to deteriorate with Hofy’s always-in-stock catalog and device refresh options.
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There comes a time when the cost of depreciation outweighs the savings you made by buying in bulk - and it may be much sooner in a device’s lifecycle than you think.
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