Renting Office Furniture vs. Buying Office Furniture
Blog: September 3, 2020
Even in the midst of a global pandemic, new businesses are being created, and new office space is being furnished. Over the past 10 days, the team at Sam Clar Office Furniture has engaged with 2 different start-up companies looking for office furniture very fast. 2 very different organizations, both asking the same question, is rental office furniture the best solution? The answer was YES AND NO…
Rental vs. Leasing
While the terms Rent and Lease are often confused and used interchangeably, there are very important differences between them.
Rental Office Furniture
Best for short-term (3 month to 6 month) requirements. Just like renting a car, when you rent furniture there is (generally) no intention of owning the furniture at the end of the rental period. The furniture is (generally) from an existing pool of inventory (not new).
- Advantages: very flexible terms, lower monthly costs.
- Disadvantages: you will not own the asset; you have limited product options when compared against leasing.
Leasing Office Furniture
As opposed to renting furniture where the furniture is owned by the office furniture rental company, when you lease office furniture, it involves the same planning, purchasing, and installing process as if you were buying the furniture. In this case, the furniture is purchased by the leasing company, who then charges you a monthly payment to use the equipment. The payment is based on a combination of the leasing factor (the financing amount charged by the leasing company), and the length of the lease. Because they are buying the furniture, the leasing company generally requires 2 to 3 years of company financial records and may require a personal guarantee from the owner(s) or principals.
- Advantages: virtually unlimited product options, planned to your specifications, monthly payments versus large single cash outlay when compared to buying outright
- Disadvantages: Long-term you pay more (including interest) when compared to buying outright, requires documented financial performance, is a financing instrument and impacts credit.
There are 2 general types of equipment leases:
Fair Market Value (FMV): Under an FMV lease, at the end of the lease period you will have the option to:
Return the furniture to the leasing company
Buy the furniture out at the agreed upon Fair Market Value of the product (the difference between what you have paid and the agreed upon value)
FMV leases carry a lower monthly payment, however, have higher “buyout” at the end of the lease period if you wish to own the furniture.
$1 Buyout: Under the $1 Buyout Option, at the end of the lease period you will own the furniture for a token payment ($1.00).
The $1 Buyout lease is commonly known as rent to own and carries a higher
monthly payment, however little to no additional payment at the end of the lease period.
What is the best option? The “best” option will always be based on your specific requirements and situation. Gong back to our 2 current engagements:
Company 1 needed to set up an office for 40 employees within 10 days. They planned to occupy their offices space for up to 5 years, and they were looking for a very inexpensive solution ($325 per employee). Company 1 asked about rental office furniture because of the speed they needed the product and their belief that renting would be the least expensive option. Because they were going to use the furniture for 60 months, we determined renting would be a much more expensive option than simply buying the furniture. In the end the Sam Clar team located a used furniture inventory that fit the schedule and the budget, and Company 1 ended up purchasing the furniture outright.
Best Option: Outright purchase
Company 2 had thirty people starting in 5 days. They also had a longer-term requirement to furnish the office with furniture that reflected their brand and company culture. In working through these requirements, we determined the best plan would be to provide a short-term solution with rental office furniture, followed by a long-term solution with permanent furniture that will either be purchased or leased on a $1 buyout basis. We delivered the rental furniture within 5 days, and we will remove that furniture and replace it with the permanent furniture as it arrives over the following 90 days.
Best Option: Short-term rental combined with long-term purchase (leasing vs. buying to be determined)
The team at Sam Clar is ready to find the best solution for your office furniture requirements. We provide short-term rental office furniture, and we provide options for financing office furniture.
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