Businesses can be expensive. When you consider the overall value of your assets including employees and equipment, it can easily exceed your wildest expectations and the profit you take in after all expenses are considered is probably fairly low. In addition, starting up a business can be costly as well, even if the overall maintenance costs are cheap.
Whether it’s computer hardware, specialised office equipment or even industrial machines, most businesses have the option of renting as opposed to buying. This has some immediately obvious benefits, but what about the disadvantages?
Types of equipment rental
First, let’s talk about the types of rental that are available. The most common option is leasing. This means you pay a fixed amount or regular payments that go towards a rental fee. You don’t own the item and you only keep it for the contract period. The second option is a hire purchase agreement. With this plan, you pay an initial deposit and then monthly payments where you are technically renting. At the end of the agreement, you’ll have paid the full price for the device and then gain ownership of the asset.
Will your equipment age?
In most cases, investing in equipment and paying full price for its ownership is worth it because you own the item and you’ll ideally want to be in business for a long time, thus making it worth the price. However, there are times when equipment could become outdated before you even pay off the full price of instalments. This is typical for things such as computer components because they are constantly being upgraded and new technology is being introduced. In these cases, it might be better to rent something for a short period of time and wait for a new model of the equipment you need to come out before investing full price.
Is it business critical?
There are some machines that businesses base their products or service around. For instance, if you’re working with metals and mass producing certain items, then you’re going to need a milling machine such as the ones from Mills CNC. Milling machines are essential to the types of business they are used in, much like how a computer is needed for any kind of online-only business. As another example, a digital art design company can’t function properly without pen display devices such as Wacom’s range of Cintiqs, so it’s important to make a distinction between essential pieces of equipment and luxury ones.
For luxury equipment, you can always rent these to help your business flourish and, perhaps at a later date, you could invest in buying your very own or purchasing it on a financing option. However, if it’s a business-critical device that you need to operate your business, then count it into your startup costs.
One of the advantages of renting equipment or purchasing them in instalments is that it’s easy to add to your budget. Instead of losing a massive chunk of money in a single month because of the costs of purchasing and installing the device or equipment, you can easily add the payments to your monthly expenses to make it easier to budget for. This relieves some stress from your finances and gives you an easier time budgeting and planning for future expenses.