Basic (10-02)

DI 39530.015 Lease/Purchase of DDS Equipment

A. Definition

Lease/purchase agreements provide that some or all payments made for the use of equipment--over a specified period of time may be applied toward the purchase of the equipment.

B. Policy

1. Advantages of lease/purchase agreement

  • Buyer has option of discontinuing item before purchase.

  • Vendor bears obligation to replace defective or troublesome equipment with new or improved equipment at minimal or no cost to buyer.

  • Leased equipment that becomes unserviceable due to amount or cost of repairs can usually be disposed of without further obligation.

2. Interest on borrowing

If equipment is acquired through lease/purchase, interest on borrowing is considered as an unallowable cost--even if allowable under State rules. This includes:

  • Bond discounts

  • Costs of financing or refinancing operations

  • Legal and professional fees paid in connection with financing or refinancing.

3. Regional approval

The DDS must obtain prior RO approval before entering into a lease/purchase agreement. The DDS must also obtain prior RO approval before converting from a lease/purchase agreement to a purchase agreement.

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DI 39530.015 - Lease/Purchase of DDS Equipment - 10/01/2002
Batch run: 04/01/2013