There are so many different ways for a business to fund and own a forklift. Rent to buy has become one of the most popular ways for a small to medium size business owner to finance and own a forklift.
How Rent to buy works
Rent-to-buy finance schemes are being marketed under various different terminologies.
- Rent to Buy
- Rent then own
- Rent then keep it
- Rent then own it
They also have some different mechanics of loan structures, depending on what you are looking to purchase.
When it specifically comes to forklifts or material handling equipment, rent-to-buy works very similarly to an operating lease.
You rent a new or pre-used forklift, for an agreed period of time. Then you make regular rental payments, for example, every month over 5 years.
You are not hiring the goods but you are making a commitment to buy them. At the end of the rental period, you pay a previously agreed amount to finalize the purchase.
The real cost of rent to buy
Just like any money you borrow, over time, the total rental payments always add up to more than the cash price of the item.
You may also have to pay fees and charges.
Generally, at the end of the term, you will have a minimum payout figure.
The things to be aware of
Check your ownership
With a finance contract, you own the goods from the beginning of the contract. You also owe a debt to the supplier of the goods (the credit provider) who will take a bill of sale or mortgage over the goods you have purchased.
There are different types of contracts with different terms so check with the supplier to find out if you have the right or obligation to purchase
Be aware of your responsibilities
If the item you are renting is damaged, stolen, or destroyed, you still have to pay rent on it. You may have to take out insurance to cover the cost of replacing the item. Sometimes this is a condition of the agreement
As well, maintenance is usually not included in the Rent then buy contract.
Read your credit contract
If you decide to take up a rent-to-buy deal, know exactly what you’re getting into. Check all the terms and conditions of the agreement before you sign anything.
Talk to your accountant or solicitor to make you are entering into the best deal for you.
- Find out if you will be charged account-keeping fees and penalties if you miss repayments, break the agreement or pay it off early.
- If you break the rental agreement, you may still have to pay an amount equal to the rental payments for the full term of the agreement. This applies even if you return the goods you were renting.
- Also, check how much you’ll have to pay at the end of the rent-to-buy agreement to buy the item outright.
Is rent to buy the best option for you?
A rent-to-buy deal can look to be very tempting, just be wary of impulse buys and watch out for salespeople who pressure you. Don’t sign anything on the spot.
Make sure you explore all your purchasing options. With forklifts, there are so many ways to purchase and own one. So make sure you do your homework
Rent to buy, can and is a great option for your business and a great way to own a forklift. Make sure you’ve thought it through and spoken to your accountant or solicitor before you sign.
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