We are often asked “why should I rent a coffee machine when I can pay for it and pay less over the 24 or 36 month period?” Good question!
Yes, if you multiply the monthly repayments by the term of the repayment, you will most certainly pay more than if you just bought the coffee machine outright. It’s that little thing called interest and of course, the pricing also includes an amount to cover financial risk and the monthly administration fees (to cover invoicing etc.).
So why rent?
For the home buyer, the answer revolves around affordability. It’s how most of us can afford to buy a car, house, furniture and other items. Many smaller repayments are infinitely better (at least psychologically!) than one large one. The same is true for an R 12 000 coffee machine.
For a company, the answer is threefold.
First there is the tax benefit of leasing the coffee machine and secondly, it doesn’t sit on the balance sheet. Off balance sheet financing is a very sound business principle and reduces the cash tie up in what may not be seen as a core production asset. Of course, we’d argue that without the coffee…there is often no production! (at least in our office where caffeine is needed at regular intervals to keep the staff awake).
Finally, there is the benefit that when the lease period expires, the machine will be removed and a more modern machine can replace it. Some companies also offer a final installment purchase option so you can own the coffee machine at the end of the rental period if you so wish.
Many coffee machine suppliers also offer a rental with maintenance contract especially to business clients where consumption is higher and 100% uptime is needed to avoid staff riots! This usually works out cheaper than having the machine serviced at recommended intervals.
Each month, regular services are performed that keep the machines in prime condition and parts are replaced without cost. When a break down occurs (and they do…after all you are dealing with hot water, fine coffee particles and pressure…a great combination for technical problems), the machines are repaired free of charge under the maintenance agreement.
So when isn’t renting a good idea? Probably when you, as an individual buyer, have a lump sum to invest and want to own the coffee machine outright from the start. You should benefit as you’ll avoid the financial risk and administrative cost loading on the rental agreement. For a business, the tax benefits and freeing up of cash flow that rentals or leases bring, are very hard to beat.
The best advice (and the most logical) is that you do a simple calculation that will help you decide what is best for your situation. Good coffee machine and coffee vending machine suppliers will usually have these “calculators” available to help you make this decision.