Most of the equipment manufacturers have an affiliated renting company. It permits them to assist their customer’s monetary transactions quite easily.
There are three main types of renting- finance renting, operating renting and contract hire.
Types of renting
- Finance leasing: – It is also known as full payout lease. This kind of leasing or renting helps you to get all the financial advantages and risks without any legal title. This renting rate is calculated to get the total value of the asset including finance costs during the contract time period. The asset is handover to a third party at the end of the renting period. Here, you can get a lion’s share in the proceeding sales. This can happen only if the renting period is not extended. You cannot become the owner of the equipment at anytime, unless you go for a private arrangement with the third party. As you can extend your renting contract period and already have paid almost the full amount during the initial phase, so you have to pay very little during the later extended period of the contract. It is sometimes referred to as “papercorn rental”.
- Operating lease: – Unlike financial leasing, operating renting is like a regular rental. It comes with a smaller time period. The renter here tries either to sell the equipment in a second-hand market or to rent it again to avoid the need to regain the total asset price by the regular lease payments. There may be a choice for elongating the renting span at the end of the initial rental phase. Just like the financial renting, you cannot become the owner of the equipment at any point of the time. But, contrary to financial leases, you will not get a single penny in the sales procedure.
- Contract Hire: – It is another kind of operating lease which involves a lot of services such as management, maintenance or replacement if the equipment needs to be repaired.
- Hire purchase:- In this kind of leasing agreement, you will get an option to purchase the equipment. They will confer the legal title to you when you have cleared al the payments. The term of a hire purchase should be notably shorter than the working life of the equipment. As you have bought the machine outright, you can easily claim capital allowances from the renting company to make as much profit from it as you can. Hire purchase agreements are written especially for domestic users only. Business owners can avail this type of renting.
It is very important for you to count on your future needs. Every kind of renting option has its own merits and demerits. It will have an everlasting effect on your monthly payments. The renting payment heavily depends upon the total value of the equipment, rate of interest and duration of the renting.
If you have any query regarding the procedure of renting and its terms and conditions, then you should immediately seek the help of your advisor for further assessment.