If your business uses expensive equipment, you’ve likely looked into the possibility of renting what you need. For a monthly lease, you can use the items to generate revenue for your business without a huge upfront cost. But even if you use average office equipment like copiers, you may find that renting is a better option. Whether you want to determine if renting is more cost effective or you’re simply trying to work equipment rental into your budget, you’ll need to be able to calculate rental rates.
Before you can start calculating, it’s essential to determine the cost of the equipment you’re planning to rent. Some places will advertise a monthly cost, but far too many will invite you to get in touch if you want a quote. This can make estimating your best course of action difficult, since you’re usually on the hook for an ongoing sales pitch once you get in touch with a rental provider. Look at the overall cost of the item in question to arrive at your intended rental term. This isn’t as simple as calculating based on the purchase price of the asset, since other things come into play.
To arrive at a monthly rate, your rental provider will likely take both current value and residual value into account. Residual value is an estimate of how much the copier will be worth by the time you’ve turned it back in. If you choose to lease a $3,500 copier for two years, for instance, the company providing the rental may calculate that the item will be worth only $1,000 at the end of the term. The company will subtract $1,000 from $3,500 to arrive at $2,500. You would then divide $2,500 by 24 months to get the value of $104.16. But don’t put that into your monthly budget just yet. You still need to factor in interest.
Unfortunately, you likely won’t get away with paying only the cost to rent the equipment. You’ll at least pay interest on borrowing the asset, just as you would if you leased a car. Although it can vary based on credit rating and type of lease, expect to pay between 0.02 and 0.10 percent extra each month for interest. If the interest rate is 0.05 on a $104.16 per month rental cost, you’ll pay an extra $5.21 each month for a total of $109.37. Over 24 months, you’ll pay $2,624.88 to rent that copier for two years.