There are many benefits to renting technology for your business rather than buying it. In today’s world, the rate of obsolescence is far too quick. You can buy expensive technology that will be outdated in a year. At that point, getting back its value is impossible, and you simply have to replace it.
When you rent technology, you don’t get to pay for it once and forget about it. However, you only pay for it as long as you’re using it. Upgrading to a new version or something entirely new that does the job better doesn’t end up costing you. Rather, you return your rented tech and start paying for the new equipment.
You will rarely end up paying anywhere close to the full value of the tech you are renting by the time it becomes obsolete, and as such it may seem like a no-brainer to rent instead of buy. However, there are some hidden costs of renting tech for your business that you need to know about in advance.
Be sure to take the following into consideration.
How is the rent price calculated?
Before we go into the hidden costs, let’s take a look at the costs you can expect to pay every month to rent the tech. How is the price calculated?
The price of rent for technology takes a number of factors into account. These include:
- Equipment cost
- Length of rental term
- Expected lifespan of equipment
With these factors in mind, the price is calculated to the benefit of both the renter and the rentee. To work out whether it is worth it, take the obsolescence rate into account. The amount you pay to rent over that period of time should be significantly less than what you would pay to buy the equipment.
Hidden fees
The number the company leasing the equipment comes to will not include extra fees that mostly involve finance administration issues. In addition, they may charge an origination fee that takes into account the cost of background checks and the like, a fee for the administration of property tax, and payment-related fees.
These are once-off costs that shouldn’t weigh you down too much. They are not going to make a big dent in the finances you have available for renting equipment. However, you need to make sure you budget for them upfront.
Equipment insurance
In addition to the rent you pay for the equipment, you will have to pay for insurance. The company leasing the equipment may include insurance in the price. Alternatively, they may require you to manage the insurance.
The insurance you get should cover the full value of all the equipment, or what is known as the replacement cost. What is replacement cost? In short, it is the sum of money you will need to replace the equipment. This is not as simple to calculate as looking at the original price. Because of degradation and obsolescence, the cost of replacement steadily goes down.
Insurance issues can become a little complicated when dealing with rented equipment. After all, if it is no longer possible to buy the equipment that you initially rented, the company may not be happy with being credited with the replacement cost. But these are issues you will work out with the leasing company and will be included in your contract.
Pay for usage
Regardless of the hidden extra costs, renting equipment is nonetheless the far more cost-effective solution. You are no longer spending thousands of dollars on equipment that is only useful for a limited period of time. You also don’t have to arrange capital to buy it all from the start.
Instead of paying for equipment that you may or may not fully use, you pay for it only as long as you are using it. This also makes it easier to source a replacement and avoid downtime when the equipment is being maintained or repaired.
In 2021, equipment becomes obsolete incredibly quickly. It is no longer worth buying expensive equipment for your office, as you will need to replace it before you have gotten your true value for money. Renting comes with some extra costs, but is always going to be significantly more affordable.
