The rental product is a form of capital equipment procurement for all types of businesses (mainly public and Government bodies. The key to a rental is that the ownership of the equipment, and all the risks associated with the ownership of the equipment, rests with the financier (lessor) rather than the lessee (the renter).
Assets and associated debt liabilities are off the balance sheet
Rental payments are an expense item for reporting purposes and are 100% tax deductible
Improved working capital, gearing and return on assets
Rental hedges against technology obsolescence
Lessee has no residual responsibility to the lessor for the value of the equipment at the end of the lease
Greater flexibility with financial certainty with no large upfront payment ensures you can change, upgrade, recapitalize and reinvest when you want to.
Many larger private sector companies are often under pressure to get the debt off their balance sheet to provide a greater return to their shareholders. This option assists in managing the ‘debt-to-equity ratios effectively. A Rental has distinct advantages over other traditional forms of equipment finance.
Insurance against Obsolescence: You are not locked into owning obsolete equipment in the event of technology making the equipment redundant.
No Residual Responsibility: whereas a finance lease locks the lessee into paying a hefty residual payment at the end of the contract, a no-such obligation exists under a Rental. The Lessor takes all the risk of ownership.
Off-Balance Sheet Financing: A Rental, unlike a finance lease, does not appear as a liability on a Company’s Balance Sheet. This means that their ‘debt to equity ratio is not affected. In short, a rental commitment does not affect a Company’s borrowing capacity.
Equipment Add-Ons: Only a Rental allows for add-ons without the need to complete a brand new lease (and the resultant legal expenses). With the Rental Agreement, it is administratively easy to add to the lease.
Taxation Benefits: Rental payments are deducted from the income of the business-like wages. A rental is an operating expense, not a capital expense and therefore represents a full 100% tax deduction (assuming 100% business use).
Use of Funds: Rental allows you to use available cash in other areas or to save cash reserves. It makes sense to rent items that depreciate rapidly and buy items that appreciate.
Total Solution Packaging: The rental option allows you to bundle in services, installation, maintenance, commissioning costs, training and even consumables into one rental payment.
Easy End-of-Term Options
At the end of the initial contract term you can:
Return: Return the goods at no charge or residual responsibility.
Upgrade: Upgrade to new equipment.
Rent: Continue to rent at a reduced rental rate for a fixed term or continue on a month-month basis.
Buy: Make an offer to buy the goods at their market value
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