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Exchange Rental is best used to finance an additional investment which enhances, expands or extends the useful working life of an existing IT solution. Put simply, the repayments that have already been made on the original facility generate an exchange allowance (see table below). This allowance is then credited against the rentals for the new product investment to keep them to a minimum. The new facility runs for a term that either mirrors the original agreement or reflects the anticipated working life of the upgraded system.

The diagrams below show how the allowable amount of new investment increases throughout the Exchange Rental period, without an increase in the repayments. The new and retained equipment is signed up on a new agreement with a term equal to that of the original Master Lease - in this case three years. The new agreement offers the same upgrade flexibility augmenting system development. The actual rentals for the new products and/or services will depend on the capital cost. They could be more or less than the percentage reduction at that time, but customers receive the full benefit in either case.  

Alternatively if the value of the new equipment is low it may be simpler for the customer to retain the percentage allowance for another occasion and accommodate the upgrade within the original agreement term via an Add-on agreement. This facility is best used to finance an additional investment, which upgrades an existing IT solution without extending its useful working life. The capital cost of the new investment is added to the outstanding balance of the original investment. The periodic payment increases over the remaining term of the facility.


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