Benefits of Rental
Advantages of Rental vs Cash
RentalCash
| May escalate instalments to suite client | Capital outlay upfront reduces working capital | ||
| V.A.T. Payable monthly | V.A.T. Payable upfront | ||
| Interest calculated on cash price before V.A.T. | Interest lost over period as cash paid upfront that could have enjoyed an interest return of its own. | ||
| 100% tax deductible monthly | Deductible by depreciation via balance sheets annually. | ||
| Operating expense in the income statement. | Appears in the financials as an asset. | ||
| No Capex approval required | Capex approval required for purchase of equipment. | ||
| Not governed by budgets | Governed by the company budget | ||
| No deposit is necessary | Capital outlay upfront | ||
| Improves ‘equity ratio’ ‘current ratio’ and ‘return on assets ratio’ on financial ratio analysis. | Has to be capitalised | ||
| Software, installation and control cards can be included into a rental. | N/a | ||
| Option to upgrade equipment is available free of additional v.a.t. On original equipment and if the same supplier is used for new equipment, a preferential discounted figure is given – effectively this is a substantially higher “trade-in” amount. | Very little/no value is attached to trade-in/2nd hand equipment after a period of +/- 3 years and therefore capital would effectively be lost when new equipment is purchased. No return on capital would be recognised. |