In the past, businesses that need new computers, networking equipment, or other technology have to purchase new ones or find second hand equipment if budget is an issue. This can be a huge unavoidable expense, and one that does not stop after the purchase. There are maintenance costs, repair, and there is also the need to stave off obsolescence by upgrading or replacing when it is needed.
Nowadays, businesses that are still on the fence when it comes to procuring technology need not worry. Equipment, whether it’s an entire department’s worth of computers or even a server room, can be rented and leased. This approach allows businesses to start immediately without worrying whether buying their own equipment will be cost efficient compared to just renting, making expenses more predictable and simplifying cash flow at the early stages.
Renting technology is also ideal for companies that need access to equipment for the short term, such as companies that host trade shows or conferences. Instead of bringing their office equipment to the location or buying new ones, they can just rent and have it delivered and deployed at the site. All everyone needs is to show up.
However, companies still need consider a few things before renting technology, such as:
The Lease Terms – as with anything involving a third party supplier, you need to review the terms carefully. Try to see how long you really need the equipment versus the lease period. Most providers default to being paid during the lease period even if you stop using the equipment. If left unchecked, you may end up paying more compared to just buying your own. Negotiate in order to get the best deals.
The Type of Lease – when it comes to renting technology, the lease usually falls into either one of two possible types, the operating lease and the capital lease. The operating lease means the leasing company are still considered the owners so the renter can only declare the equipment as monthly operating expense instead of a depreciable asset. A capital lease, on the other hand, considers the equipment as owned by the renter, so it can be considered for tax deduction but also means the renter has to worry about obsolescence until the end of the contract.
The Length of Contract – renters can expect lower monthly payments for longer contracts, but this is not always good as there will be a point where the amount paid in total will be more expensive compared to just buying equipment. It is best to find the sweet spot or to negotiate riders, such as longer warranties, regular maintenance, free upgrades, etc.
The Provider’s Specialty – providers of rented equipment may have different specialties, some cater to clients who need immediate deployment of units for trade shows or seminars, while other providers might be focusing more on long term leases with maintenance, repair, and upgrades as part of the agreement. Their prices will reflect these differences as well as the kind of service you’ll get, so it’s important to consider your needs first and whether it’s in line with your provider’s expertise.
Terms for Terminating the Contract Early – before agreeing to a lease contract, find out the terms if you want to terminate the contract earlier than the agreed upon date. This may be a possibility for a number of reasons, such as no longer needing the equipment, wanting to buy your own, or the need to upgrade to newer technology. It is expected that the leasing company will not easily let people off the hook, and you may find yourself still contractually obligated to pay for the rest of the contract.
Insurance – the equipment needs to be insured, this is never in doubt. What’s up for consideration is whether you have to insure the equipment yourself or if it’s going to be insured by the leasing company. In the latter’s case, the leasing company may increase your monthly payments in order to cover insurance on their end. It may be a good idea to ask about this first and see if you can lower the costs by securing your own insurance.
Buyout Option – it is also a good idea to ask if there’s a buyout option from the leasing company. This basically allows you to retain ownership of the rented equipment once the lease contract ends. This is important to settle beforehand, because the monthly payments will differ based on the buyout option. If you will be given the option to buy the equipment for fair market value upon end of lease, you may end up getting lower monthly rates compared to a buyout option that automatically gives ownership upon end of contract.
Ultimately, all the factors that you need to consider when renting technology are mostly related to finding out your specific needs and capabilities, and finding leasing companies or negotiating terms that will give you the best deal. Because the main point of renting as opposed to buying is to lower your expenditure on your end.