Introduction to Rental Financing
Rental financing has been created to make it possible for you to expand your systems as required, without affecting your budgets and cash flow. It offers the greatest possible tax advantages and caters for the current high inflation rate in the economy. Financing packages are created depending on your requirements to cater for cash flow and budget constraints, rent-free periods, residual values and bullet payments.
Rental Agreement Features
Rentals give clients full use of the equipment over a period of time at a monthly cost, but do not confer right of ownership. Our intention is to ensure you enjoy full use of equipment at the lowest cost possible.
Rentals are 100% tax deductible as an operating expense. Your budget is therefore not affected by capital expenditure (capex) constraints and allows you flexibility to upgrade within the rental period, or within a fiscal year. Value Added Tax (VAT) is not capitalised on the agreements but paid monthly on the rental. This provides valuable savings at the time of upgrading as VAT is only paid for the period the equipment is in use.
A five-year agreement is the norm, however 36- and 48-month periods are also available.
Normally an escalation rate of approximately the expected rate of inflation is built into the rental structure. This takes future rentals into account by considering inflation (which erodes the value of money over time), keeping the payment equal in real terms measured today.
Rental is an operating expense and is not reflected on the balance sheet in any way. Rather it is shown in the income and expenditure statement and noted in the accounts as a commitment.
Advantages Of Rental As Opposed To Cash