There are a number of aspects a new business owner needs to consider, besides location and staffing – like office equipment costing. Do you buy it outright, or rent it instead?

Both options have their share of benefits and disadvantages; we solicited feedback from several local companies involved in both industries, and this is what we found.

Needs vs. Budget

Ultimately, one’s choice comes down to budget for IT expenditure and the needs of the business. Whatever the approach, one thing is for sure: most businesses can benefit from having the latest technology and the edge that gives them over their competition. But keeping up costs money, and therein lies the rub.

“Many companies are considering renting instead of buying, as a means to still benefit from state-of-the-art equipment, without the exorbitant costs,” explained DJ Kumbula, chief executive officer of Qrent.

Renting makes sense for Kumbula, not only because he is invested in the renting business, but because it gives companies of all sizes a way to obtain the latest technology right now at a fraction of the up-front cost.

Obsolete obsolescence

In addition to cost implications, renting skirts around another problem: technology changes rapidly, and something you bought two years ago may already be dated.

“Obsolescence is no longer a worry, as the financial burden of out-of-date equipment falls on the shoulders of the leasing provider. Once the lease is up, the company can access the newest and fastest equipment, without a large capital outlay,” Kumbula said.

So renting IT or office equipment could save the company money every month, and it provides access to the latest devices, but what other benefits are there?

Well, when you rent equipment from a company, it comes with built-in support services that you’d otherwise have to supply yourself when buying a new server, printer or telephone for the office.

Then there is the added benefit that new businesses can budget accordingly, as owners will know exactly how much they have to spend on equipment and for how long they’ll have it.

“Leasing provides the use of equipment for set periods of time at a fixed cost. It takes on and manages the risks associated with equipment ownership. It also, more often than not, includes installation, maintenance and other services, again removing the need for capital outlay,” Kumbula explains.

Johannesburg-based office rental company Go Rentals agrees with Kumbula, explaining that since rental instalments are far lower than the costs of paying up-front, businesses free up funds to be spent on other items.

“Because the payments are spread over the rental period, this aspect of expenditure planning is completely simplified. There is no down payment, GST is paid per month instead of in advance as a lump sum. Put simply, you pay as you use,” Go Rentals explained.

By now you should be wondering why you should even consider buying outright. Let’s get to that now.

So… what should you do?

It all really depends on what you are thinking about renting.

Take a company like RentWare as an example. It makes a rather valid point by saying that rental IT equipment works best when acquired for temporary staff.

“Temporary employees need temporary technology. By renting you can coordinate the installation and removal of computers, printers and other technology for any period of time specified. If you hire a temporary employee, hire temporary equipment also,” it explained.

As an example, an Acer Aspire V3 notebook with Intel Core i7 3.2GHz Processor and 8GB DDR3 1333MHz RAM, can be rented for R240 a day if you need it for less than 7 days. If you want it for a week, expect to pay around R850. For a month or two it will be R1050, and for more than two months (up to a year) you’re looking at R990 a month.

According to Price Check, the same laptop brand-new would retail for around R15 000. But if you rent it at the maximum period of one year, you are going to pay R11 800. By going that route, you saved yourself and your company just over R3 000 for that year; should you consider renewing the rental contract, you can also reasonably expect that laptop to be upgraded to a newer model for the following year.

Of course, that is not necessarily the case with every product you rent. In the Aspire V3’s case, it was cheaper to rent for the full 12-month period, but some devices (like printers and tablets) start to become more expensive around month six or seven.

In summary

The model of the story here should be that yes, renting IT and office equipment for a couple of months can work for your businesses in a specific (and temporary) scenario, but our cursory calculations revealed that the longer you rent for, the more expensive it will become.

To come back to RentWare, it can totally be to your benefit if you have to rent one laptop here and a screen there for a short time, but it seems like sustaining that model will work out more expensive over time.

In other words, renting can work for businesses as long you know how long you need the equipment for, what your needs are going to be, you have a solid budget to work with and you do a lot of research by comparing companies, rental periods and Terms &Conditions.

As Peter Alexander from Entrepreneur Magazine pointed out, if you have the money to buy, rather do that instead.

“Ultimately, a few simple rules of thumb may help you decide to lease or buy. If your equipment requirements are relatively small and you have the money–or can get a low-interest loan–then just buy it. You’ll save money in the long run.”

He also points out the flip side to that, however. If you are starting a company with ten employees, it is going to work out cheaper to rent 10 computers for a short time, rather than buying all 10 PCs in one go.

Ultimately, whether you rent or buy is up to you based on your business’s needs and circumstances. We hope these pointers help you reach the right conclusion for you.

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From the start, owners need to decide if they want to buy all of the printers, computers, monitors and servers, or if they want to rent what they might need on a monthly basis while keeping overheads as low as possible.

Choosing between them is a lot tougher than it might seem at first glance, as there are a number of factors that come into play. Most important are the needs and budget constraints of the company.

Our research revealed that renting a full PC over a one-year period works out only a fraction cheaper than buying it off the shelf, while renting a tablet will see you paying more than three times the retail cost.

While both approaches have inherent pros and cons, the most important conclusion we drew is that companies need to do their own research. With the knowledge of what renting vs. owning entails and the pitfalls of each approach, there is cash to be saved; it’s all just a question of how each model meets your needs.

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[Image – CC by 2.0/tim_d]