Lease VS Rent
By Ibby Smith Stofer
Many are conflicted when it comes to making the decision between renting and leasing, so I recently wrote two articles for Med One Capital focusing on why healthcare providers lease or rent medical devices. The following is a summary of the information I wrote in those articles. You can also access the full rental article or lease article.
Leasing is often compared to home buying. There are some differences as well as shared features:
- A typical term is between 12 to 72 months
- There may or may not be a down payment required
- Credit approvals required
- Generally, the device is new
- Insurance is responsibility of the leasing party
- Maintenance is the responsibility of the leasing party
- Ownership transfers at the end of the payment terms completion (Capital Leases)
- Can purchase equipment at end of term at fair market value (Operating Leases)
Rental programs offer a fixed term that can vary from a day to months or sometimes longer. Again, consumers are familiar with renting anything from cars to computers. The features include:
- Offers a low monthly payment
- Can return equipment at end of term with no further obligation
- Utilizes customer's operating budget
- Equipment may be new or used
- Insurance and maintenance is the responsibility of rental provider
- Equipment may or may not be configured as desired
- It can be difficult to find the exact model and configuration desired
Another option that offers the best of both of these programs is an Equity Rental program. Under this program, customers:
- Determine the exact model and configuration
- Receive NEW equipment
- Issue only 1-month purchase order (In most cases)
- Receive manufacturers warranty
- Build 50% equity that can be applied to purchase at any time
- Customer may return the equipment at any time. (Or at the end of a committed term)
So how do healthcare providers know which program is best for them? While there are no hard and fast rules, there are some common factors to be considered.
Lease plans are generally used when capital money is not immediately available, but the provider is looking for tax advantage and balance sheet issues are not of concern.
Rental options are most often used for short term needs such as peak flu seasons, recalls and higher census periods as well as patient specific needs. This expense is generally considered an operating expense and is not subject to finance department approvals.
Equity Rental provides the provider the option to acquire technology over time with the benefit of building equity for future purchase, but does not obligate the purchase.
Med One Capital offers all of the options to both the provider customer as well as the vendor partners. We believe that by offering a range of programs we allow the customer to choose what is right for them.
Our range of programs also includes:
- Purchase of units we own that were previously leased.
- Asset Management
- Biomedical Services
For additional information please visit our website, or contact us using the information below: