A scale can be a significant cost for a company and many times we are asked to “weigh in” on the advantages and disadvantages of leasing versus owning the scale. The decision should be based on several factors, including overall costs, long term use or needs and plans you have for the scale, and the facility in which the scale is located.
Today’s leases are cleaner than in years gone by
Leasing a scale should not be confused with a scale “Rental”. A Rental program offered by Fairbanks Scales is a short term rental and the scale is returned at the end of the established timeframe. Renting allows the facility operators to keep their facility up and running while significant maintenance or replacement of an old scale is taking place and the customer cannot afford to be without a scale. Typical rental terms average one to three months. Beyond that, costs start to add up.
Leases offer a long term solution at a fixed cost with the same advantages as owning the scale. Leases are much cleaner than they used to be. With any lease, finance charges are built into the payment. However, many lease programs today are closed end contracts, which allows the customer to know exactly what they are paying and for how long. This type of contract also may offer a dollar buy out at the end of the lease program.
One thing to note is that the customer can often borrow money from their own financial institution at a better rate than if they go through a third party lease company.
Leasing is great for an unexpected scale replacement or short term projects
Obviously purchasing the product up-front is the least expensive overall option, and is still the norm for most users. However, there are situations in which a lease is a good option.
When a scale at an existing facility needs to be replaced unexpectedly, and is not part of the current equipment budget, a lease can be a valid option. A monthly payment may soften the blow of an up-front unbudgeted capital expenditure.
Another area where a lease may make sense is for companies that frequently provide project work or services that are remote, short term, and/or on a contract basis. Again, monthly charges may be easier to build into the price of this type of overall project or contract and can be spread amongst several projects.
Maintenance costs typically do not differ between a lease and owning. The same maintenance requirements and recommendations will apply. In the case of a rental scale from a factory, the maintenance is often built into the rental costs, excluding physical and abusive repairs, which would be additional costs.
Checklist of advantages, disadvantages, and what the user should watch out for
Owning or purchasing up-front will provide the customer more savings and better yield over the life of the scale. Leasing costs less money up-front but will cost more overall. Here’s a list summarizing advantages and disadvantages.
- No high upfront costs compared to purchase
- Fixed monthly payment for operating costs versus a capital budget
- Often can build in additional peripheral devises often overlooked due to cost
- Overall higher costs
- Third party lease company
What to look out for
- Make sure to use a reputable lease company with a “closed end” lease agreement
- Be thorough in equipment selection and not just equipment that is striped in order to keep the monthly payment down.
- Customer controls all aspects of the scale
- Far lower overall costs
- Customer owns the asset of equipment and has the capital advantage for tax purposes
- Up-front costs if not in a budget or emergency funds not available.
- Capital expenditure
What to look out for?
- Do not settle for a product that does not offer modern technology.
- Base decision on a price comparison of product technology, history and application capabilities to ensure the most long term option on the investment.
Your needs or circumstances can and do change, but due to the type of product and other factors that often goes along with a scale purchase, including foundations and utilities, the decision to buy or lease the scale must be made first, before placing an order for a scale.
To decide which option is best, your best bet is to sit down with an Area Sales Manager from Fairbanks to discuss all your short and long term needs and specific facility issues. In many cases, Fairbanks can provide estimates of both solutions for customer review and comparison.