Equipment Rental is an agreement between a financier and a customer whereby the financier buys the equipment on behalf of the customer and rents it back to them over a fixed period.
How does Equipment Rental work?
When using an Equipment Rental, the financier buys the equipment on behalf of the customer and rents it to them for fixed payments over a fixed period.
The customer simply makes fixed monthly rent payments, and at the end of the contract either hands back the equipment to the financier (with no more to pay), continues the rental agreement or buys the equipment outright at market value.
Benefits of Equipment Rental
- Flexible contract terms
- Fixed interest rates
- Fixed monthly rentals
- Costs are known in advance
- Can be more cost effective than paying "cash", especially for equipment that has a short useful life
- A residual can be applied in some cases, lowering monthly payments
- Your equipment is "off balance sheet"
- Rental payments can be claimed as a tax deduction, which can be more tax effective than other forms of finance.
- Rented equipment is not considered to be a business asset (or the debt a business liability)
Tax implications of Equipment Rental
With Equipment Rental the customer can claim 100% of the rental payments as a tax deduction. This can be more tax effective than other forms of finance where depreciation plus interest costs are claimed.