FEAT RE FEA ATURE
TEST &TEST &MEASUREMENT RENTVSBUY. UY fin
Mike Sullivan, business m nager at Electro Rent UK asks what are the financial options and implications when it comes to test equipment?
ke Sullivan, business manager at Electro Rent UK asks w at are the ial o tio s a
im ica io W
hen deciding between buying and renting test equipment, Return on
Investment (ROI) may be the first factor that springs to mind, but it’s not the only story. One time payments may be
advantageous to a business that receives money in waves, especially if the
equipment is essential to the business. However, many companies do not have the upfront funding to make large purchases outright.
These companies may not be able to obtain the credit to make up for the lack of cash, and the interest rate on lines of credit that are used to purchase a piece of equipment may not be advantageous. Equipment still requiresmaintenance and possibly insurance alongside themonthly premiumpayment on the purchase loan. These can create unforeseen costs.
THE PROS AND CONS OF REN ING
company to test equipme the short term. Renting a Renting saves money for
long-termcommitment, to try out different brands, or to upgrade
equipment as needs change. However, renting creates an ongoing cost that may be too much for a business to handle during a downswing in sales. Since proj
ojects can slip and pricing
stability is important, business owners should make sure to discuss rate
evolution upfront with their suppliers. It is equally important to verify the real size
18 18 DECEMBER JANUAR 201 ECEMBER/JANUARY 2017 | ELEC ELECTRONICS
PROS AND CONS OF RENTING a business in lso allows a nt without
it co s to test e and immediate availability of the
supplier’s equipment pool to ensure that a failed unit can be replaced without delay. Renting your test equipment gives you the freedom to try out devices from different manufacturers without entering into any long-termcommitment.
LEASE VS REN EASE VS RENT
The key difference in a lease is that a time commitment is made. While leases may have better financial terms than a rental depending on the individual agreement, the ownership of a piece of equipment may only transfer at the end
The two major of a lease.
types of leases include
the operating lease and the finance lease. Operating leases do not allow a business owner to purchase a piece of equipment after the lease is up. The lessee will never
Figure 1 & 2: Figure 1 & 2:
Renting your test equipment gives you the freedom to try out devices from different manufacturers without entering into any long- term commitment
Renting your test
equipment gives you the freedom to try out
devices from different manufacturers without entering into any long- term commitment
t? Y...
have an option for a balloon payment at the end of a lease. Running costs are included in the lease payment, meaning they are fixed.
A financing lease occurs if a business is leasing a piece of equipment for less than its useful life and takes over
ownership at the end of the lease term. The option to buy usually comes with a balloon/residual amount that the lessee must pay in order to buy the equipment. Running costs have the ability to fluctuate on a lessee because they are not included in the base payment that is made to the equipment owner. Another financial option that your business has available is to separate budgets. Capital budgets are for the purchase of assets, while operational or expense budgets have to do with the day to day expenses of a business. For assets meant to be utilised year, capital budgeti
ng is usually the best for more than one
option. The money has to come fromthe cash that a business has on hand, and the capital budget is meant for the purchase of assets that will produce income for the business.
Renting equipment, especially when rented for less than a year, usually goes under the operational budget Capital expenditures sometime interact with the operational budget if you are servicing a loan with a monthly rental payment. If a capital budget increases, the operational budget will usually have to increase. In general, it is a good practice to keep 67 percent of your money for operating expenses and 33 percent set aside for capital assets. If all of your income is operational, then your business will not be able to grow very easily.
.
Taxes are also an important aspect of learning how to budget. Operational expenses can be written off in the same year that those expenses occur. Any capital expenditures need to order tomaximise th
eir positive effect on be depreciated in
your business. For themost part,
operational expenses will give you the best position on your taxes in the short term. Each business must organise its
purchases and rentals according to its budget Leasing should be an option for a business that is looking to increase its ability to self-serve. Buying assets can also be a tax advantage for a company.
. Electro Rent UK
www.electrorent-europe.com
www.electrorent-europe.com T: 00800 1234 40 40
/ ELECTRONICS ELECTRONICS
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