Leasing and renting are two ways factories have to quickly obtain capital equipment without reducing their creditworthiness.
However, we are not convinced by some of their characteristics as we will discuss below.
WHAT ARE LEASING AND RENTING
With both ways, factories can access new machinery for their food and beverage lines quickly and without incurring the regular initial costs of a purchase.
The only thing they need is the payment of a fixed monthly fee in the long term (over a period of a year).
As we see, there is no place for used industrial machinery within these systems.
Both leasing and renting allow companies to become familiar with machines, see how they work, etc.
WHICH ARE THE DIFFERENCES BETWEEN LEASING AND RENTING?
The Capital webpage sets very clearly the main difference between machinery renting and leasing. Please note that we focus on the particularities in Spain.
More precisely, there are some other specific differences between both systems that we can point out:
1. THE BENEFICIARY
Renting is usually intended for individuals, whereas leasing is thought for businesses and self-employed professionals.
That is why leasing carries tax advantages and is regulated by Law (3rd Aditionnal Disposition of Law 10/2014 of 26 June on the regulation, supervision and solvency of credit institutions). And it is only done by accredited financial institutions.
For its part, any private company can sign a renting contract without any problem.
2. POSSIBILITY OF PURCHASING
Renting, as a rental system, does not give the possibility of taking ownership of the machine on the expiry of the contract.
Leasing is much more flexible in this sense.
Upon termination of a contract for the use of the machine for a certain time, it is possible to purchase it, return it or extend the contract. In the last case, the monthly fee would be obviously reduced.
3. COVERAGE
Renting includes coverage for maintenance and repairs, whereas leasing implies the lessee takes charge of all the obligations.
SHOULD I GO FOR LEASING OR RENTING IN MY FOOD AND BEVERAGE FACTORY?
As we have seen, the two methods of rental and financing have several virtues and allow the quick incorporation of machinery to our food and beverage production lines.
However, there are some disadvantages of leasing and renting which should be borne in mind before taking the decision.
The disadvantages of leasing and renting are the following:
1. BE CAREFUL WITH PENALTY CLAUSES OF LEASING AND RENTING
In the beginning, it seems everything is really easy to acquire capital goods for our lines. Nevertheless, we shouldn’t forget that we are entering into long-term contracts subject to specific conditions.
The lessor may establish for example the maximum the working hours of the machine at the end of contract
The food and beverage industry is quite flexible and highly depends on external factors. An example of them is the seasonality and the differences in the amount of raw material that arrive at the factory from one year to the next.
Our business is a complicated sector. The last thing factories should be worried about is the exceeding number of hours they have been using a machine of their lines.
Similarly, these conditions are strict as well when it comes to the termination date. For any reason, if we wish to stop using the machine before expected, we would need to bear the payment of penalties.
2. INTERESTS AND FINANCIAL COSTS OF LEASING AND EL RENTING. ARE WE REALLY SAVING MONEY?
In this section, we will talk about the case of intention to buy the machine.
The principle of leasing is simple: a fixed monthly fee is paid little by little and at the end of the contract we decide if we finally buy the machine.
However, our advice is to stop for a while and make numbers. Is it possible to get a cheap leasing of industrial machinery?
Without any doubt, this method of purchase implies a large number of interests that we pay to the entity we are signing the contract with.
That said, the interests of a leasing are vastly higher than interests paid for any other regular bank loan for the acquisition of goods.
In this way, if we finally decide to buy the machine, we would have paid the cost of a new machine plus a huge number of interests.
For this reason, this system is much less appealing than the acquisition of used machinery for the canning, food and beverage industry.
3. FORGET ABOUT MODIFICATIONS IN THE MACHINES OF YOUR LINE OF FOOD AND BEVERAGE
Upon termination of a contract of leasing, if we don’t wish to buy the machine, the lessors expects to find it exactly in the same conditions as the beginning of the contract.
In the first place, we all know that factories are frenetic places with continuously people and forklifts passing by. In this movement, it is likely that machines are lightly damaged or harmed.
These unavoidable damages, even if they are small, will translate into penalties at the end of the contact.
In the same way, in these contracts, the implementation of changes or improvements on the machines is strictly forbidden without the prior consent of the entity.
These entities are no experts neither in machinery nor in their functioning. For that reason, something as simple and necessary in some occasions as a change of format in a machine, may turn into a very complicated task.
4. MACHINERY LEASING AND RENTING CONSTRAINTS
In addition to all the conditions that we mentioned as disadvantages of industrial machinery leasing, we need to take into account other series of circumstances that can arise as well.
One of them is that not all the machines are available for an acquisition through leasing. It is possible that the option we are looking for is not offered.
You should also know that many industrial leasing companies or entities, in addition to the payment of monthly fees, charge a deposit at the beginning of the contract for security.
USED INDUSTRIAL MACHINERY: OWN YOUR MACHINERY FROM THE MINUTE 0 WITH TIGHT INVESTMENT
In Maquinaria Conservera Tomás Guillén, we have always supported second-hand machinery as the best alternative to the purchase of new equipment.
We believe it is more convenient for our clients to own the equipment located in their food and beverage factories. This avoids contracts with strict conditions and the payment of huge interests.
Used machinery for food and beverage will give you the change of having semi-new equipment without the monthly instalments of leasing or renting.
