Why Rental

Rental vs Cash

BENEFIT Lease Payment in Cash Channel Capital Rental
Off Balance Sheet No No Yes
Cash flow predictability through Fixed payments Yes No Yes
Goods can be returned for exchange and their value extended into the future No No Yes
Tax deductibility of Rental Yes No Yes
No major cash outlay Yes No Yes
All equipment and intangibles through a single monthly payment No No Yes
Contract management & Cost Centre reporting  No No Yes
Sales & Rent back of existing equipment No No Yes
Right to exchange portion of installed products during contract term, without penalty No No Yes
Financial advantages of rental in Capital and accounting reporting terms No No Yes

Rental vs Lease vs Cash

Rental Lease Cash
Can have escalations Can not have escalations Can not have escalations
Vat Payable monthly Vat Payable upfront Vat Payable upfront
Interest calculated on cash price before VAT Interest charged on top of VAT Interest lower over period as cash paid upfront
100% tax deductible Interest portion tax deductible Deducted by depreciation via balance sheet annually
Operating expense in Income Statement Appears as an Asset in financial statement Appears as an Asset in financial statement
No CAPEX approval required CAPEX approval required to purchase assets CAPEX approval required to purchase assets
Not restricted by company budgets Restricted by company budgets Restricted by company budgets
No deposits required Usually requires upfront deposit Cash outlay upfront
Rental can be tailored to specific needs – i.e. deposit, upgrades, escalation, term, insurance Little flexibility N/A
Improves company equity and value ratios Capitalized Capitalized