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The price you pay

Nov. 24, 2008 - RENTING white goods or office equipment rather than buying outright has one obvious advantage: you don't have to find large amounts of money before you can take the goods home.


November 24, 2008
By Bina Brown

Renting equipment can be far more expensive than you might
think, writes Bina Brown.

RENTING white goods or office equipment rather than buying
outright has one obvious advantage: you don't have to find large
amounts of money before you can take the goods home.

But that is where the real benefits end.

Renting generally means you will pay more for the goods overall
– sometimes substantially more.

FEES AND CHARGES

Most rental companies work out a monthly rental amount based on
the price of the equipment and the rental term chosen – usually 12,
24 or 36 months. GST is added to the rental amount. The longer the
term, the lower the monthly payments.

To use a simple example (based on the Flexirent calculator): if
a person in the lowest tax bracket wants to rent equipment with a
purchase price of $2200 (including GST) over 12 months they can
expect to pay $245.08 a month (including GST), or $56.36 a week. So
over the 12-month period they would have paid $2940.96.

Spread over two years the monthly payments drop to $139.48,
taking the total cost of the goods to $3347.52.

What can make a deal look infinitely more attractive is the
after-tax cost, which is often quoted. In the above example, over
two years the weekly payments would be $32.08 a week, or $26.78
after tax.

It makes the assumption that the equipment will be used 100 per
cent for business use, which will not always be the case.

Anyone considering a rental agreement should probably speak to a
tax adviser about their entitlements before they decide to sign a
contract.

[READ MORE]


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