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To buy or not to buy?

Discussion in 'Design and technology' started by modelmaker, Jun 13, 2011.

  1. modelmaker

    modelmaker Lead commenter

    Leasing is mostly provided through finance companies rather than equipment suppliers. The supplier may be able to give you a leasing cost but you will never know the relationship between the supplier and the finance company. The supplier may be getting a kickback on the deal
    You should contact a range of finance companies yourself and compare their offers, but in doing so ask about any additional costs. What I mean by this is there will be a monthly or quarterly cost for the lease but there may also be a cost for drawing up the lease, a cost at the end of the lease term.
    Most importantly, check what hapens at the end of the lease. Is there an option to own the equipment or does it entail a further lease term with the equipment being taken away if you don't take it up? I've known several schools get caught out by this. There is no need to. A reputable finance company will recognise that over the lease term they will have made a decent return on the money they invested and allow you to take final ownership of the goods for a nominal sum, usually the cost of a month's rental, a fee I think is unjust anyway as the amount of paperwork to change ownership for a £20K lease is identical to that of a £10K lease.
    To give you some background on leasing, it became popular as a means of financing equipment during the 80s to exploit a loophole in taxation and help small businesses finance the purchase of goods when their bank wasn't amenable. The other option was hire purchase.
    With hire purchase, the total amount of VAT on the goods becomes payable as soon as the goods are invoiced, so with an expensive item this can be a significant amount to find for a small business hoping the investment will make it profitable,
    With leasing, the goods are rented and VAT becomes due on each rental payment, therefore much more affordable. In the early days, the rules were you could never own the equipment but would be able to keep them on a peppercorn rent of around 2% of the original rental cost or sell them to a third party and pay the lease company what you got. As many things being leased were constantly being devalued by improvements in technology (Think of the cost of a computer you bought 3 or 5 years ago compared to its worth now) it was a simple matter to flog it to a mate who then sold it back to you for the same amount.
    Nowadays, the lease company will arrange all this themselves but make a cost for the transfer of ownership.
    The logical thing for most schools would be to enterinto hire purchase agreements and avoid the transfer of ownership cost or small print that doesn't allow it to own the goods, however I believe schools, or at least some schools are not allowed to borrow but they are allowed to rent.
    I hope this made some sense. In short, if you want to get a good deal and impress your burser, get several quotations from finance companies and paly them off against each other until you get the best deal. Tie them down to the fine detail.

  2. Thanks so much modelmaker for giving me such a full reply. You have been really helpful.
  3. I can recommend EMS cookercare. I have bought cookers from them and they are very good with servicing etc. Don't let companies con you into getting the 500mm ones like the ones I have inherited. Double ovens are also good.

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