Why a Business Should Consider Rent To Own
Why rent to own is a good idea for a business.
Opening a business in today’s economy is tough and full of unknown factors. Take for instance the recent Covid-19 pandemic that has slaughtered economies worldwide. Who could ever have predicted the widespread damage that Covid has wreaked both on the everyday lives of people and on the economy.
Every day more and more businesses have been forced to close their doors and while there is an unfortunate loss of jobs, there is also a business owner who normally loses just about everything that they own. It is this possible loss by business owners that I wish to address in this article. It is possible to minimize and reduce your risk substantially.
When starting any business, banks and lending institutions are generally not very helpful. Should you wish to purchase a business vehicle the banks would normally require you to offer some sort of collateral or surety that you will continue to pay for the loan that they have given to you. This is usually through the director or owner of the company providing guarantees which would basically allow the banks to attach their private property in the case of a business not succeeding for any reason. This can cost you dearly if you need to close your business.
There is a safer way to obtain a vehicle for your business – rent to own a car or otherwise also called a no finance car. The new way to own a car or business vehicle without the risks.
Why is Rent To Own Safer For A New Business?
When a vehicle is used under a rent-to-buy agreement, ownership of the vehicle remains in the renting company’s name until such time as the rental contract ends – usually 48 months. The renter is then able to purchase the vehicle direct for a very small token fee which is built into the initial contract. This amount varies from company to company but can be as low as just R100.00.
Should the renter experience difficulties at any stage during the contract period, the vehicle can simply be handed back to the no-finance car company without the fear of any further charges. No suretyships, no attaching private assets, etc. Simply hand the vehicle back and walk away from your problems.
Great for business financials!
A further advantage of a no-finance vehicle is your tax liability. When a company prepares its annual financials there are different types of costs that get taken into account for company expenses.
A vehicle that is purchased either by cash or by bank financing is considered an asset. The only expenses that can be claimed to reduce your tax liability on an asset are the actual amount of the interest charged by the bank and a yearly depreciation cost.
However a vehicle that is rented is considered to be a cost and therefore the entire cost of the rental can be claimed as an expense against your tax liability.
Additionally, at the end of your rental period, the vehicle can be purchased for a nominal amount. The director, if they so wish, could then purchase the vehicle at the same price from the company, theoretically and legally purchasing a vehicle far below market value.
Even though the monthly repayments associated with rent to own vehicles may be higher than those of bank-financed vehicles, there are just so many benefits to rent to own a car. Rent to own should be an option that you seriously consider when deciding on opening your next business venture.