Coffee Machine Rental: All The Options Explained
Coffee machine rentals outnumber coffee machine sales about five to one for offices in South Africa. But renting is a mug’s game right? Aren’t you just paying more in the long run? Although this is sometimes the case, in the coffee industry there are many rental plans which are financially superior to outright purchases. We put all the options under a microscope here.
Coffee Machine Leasing or Bank finance:
The coffee machine rental industry mirrors the photocopier industry quite closely in South Africa with the most common rental solution being a bank financed lease or rental.
What is it?
A bank financed rental is essentially an extended purchase with interest added. When a coffee company offers a rental which is bank financed, it is essentially a long term lease option. The coffee machine either becomes the customers after the term of the agreement or sometimes even remains property of the coffee company, and the customer needs to refinance another option if they want to keep using a coffee machine
What is the rental term?
The rental is always set between 36 and 60 months
What does a financed coffee machine rental cost me in the end?
The longer the term you choose, the lower the monthly installments but the more you land up paying in the end. The final cost of the coffee machine is usually between 18% -25% more than if you bought the machine on day one.
Does a financed rental include maintenance?
There are exceptions but usually not. Because the rental is financed by the bank, the coffee company is paid out immediately and the financial payout to the coffee company is exactly equivalent to an outright sale of a coffee machine to you. The bank makes its money on the interest.
Can I get out of it if it isn’t working for me anymore?
These are the most rigid of contracts and we have never seen a company “let off”. We have seen many companies taken to court in the event that they choose not to pay or fulfil the remainder of their rental term.
Does the coffee machine belong to me in the end?
Because of some South African laws you are often required to pay a final, “purchasing fee” for the coffee machine but this fee is usually only one month’s rental amount.
What are the advantages of a financed rental?
The rental costs are usually very low especially if you elect for a 60 month term rental.
What are the disadvantages of a financed rental?
A financed rental is almost impossible to get out of and a 36 month or 60 month term is a very long term to commit to. To view our opinion on the importance of flexibility see our video below:
Coffee Machine Straight Rental:
A coffee machine straight rental is similar to a bank financing arrangement except the rental is usually run and financed by the coffee company itself.
What is it?
A straight coffee machine rental is a rental offered by the coffee company which allows the customer to get a coffee machine without a high initial outlay
What is the rental term?
The rental term is usually 2-3 years
What does a straight coffee machine rental cost me in the end?
Because coffee companies need to make their money back far quicker than banks and financial institutions, the “interest charged” is often significantly higher than bank interest rates. One can expect to pay between 50%-100% more than the normal purchase price of a coffee machine.
Does a straight coffee machine rental include maintenance?
There are some coffee companies which add on an extra fee if you want maintenance and servicing but usually the rental fee includes maintenance costs.
Can I get out of it if it isn’t working for me anymore?
Because coffee companies do not usually have large legal departments and often try to avoid costly legal battles at all costs, many will let you off if things aren’t working as long as you have a good enough reason.
Does the coffee machine belong to me in the end?
The coffee machine rental is almost always an indefinite rental which only ends when you decide you no longer require a coffee machine. In most cases the coffee machine never becomes the customers in this type of model
What are the advantages of a straight coffee machine rental?
There is a degree of flexibility in this package as you can change coffee machine types midway through the rental as the rental is through the coffee company itself and not the bank.
What are the disadvantages of a straight coffee machine rental?
The rental costs in this plan are usually the highest out of all the rental options.
Coffee Machine Linked Rental:
A coffee machine linked rental is a rental where the price of the rental premium is linked to the quantity of coffee which you buy
What is it?
A linked coffee rental is one where you can pay a very small amount of money to rent the machine if you buy a certain amount of product from the coffee machine provider. For example if the coffee machine costs R10,000 to buy you can usually rent the machine for as little as R250 per month as long as you buy your coffee from the company whom you are renting the machine from.
What is the rental term?
The rental term can be as short as a month-to-month rental and as long as a 2 year rental term.
What does a linked coffee machine rental cost me in the end?
Because the coffee company subsidizes the rental, the price you pay at the end of the rental term is usually only 25% of the price of the machine itself. You are however, spending a considerable amount of money on the coffee during the course of the rental, which enables the coffee company to subsidize you rental to such a degree.
Does a straight coffee machine rental include maintenance?
Like in fixed rental plans, the industry norm is to include maintenance in your monthly rental amount but it does vary from company to company.
Can I get out of it if it isn’t working for me anymore?
This again depends on the company but liked in the fixed rental plans, the rental is directly with the coffee company and therefore it is often possible.
Does the coffee machine belong to me at the end of the rental?
The coffee machine almost always remains the property of the coffee company.
What are the advantages of a linked coffee machine rental?
This is the cheapest rental solution by far and this type of rental is more flexible than with a bank financed option.
What are the disadvantages of a straight coffee machine rental?
You need to buy the coffee from the coffee company renting the machine in order to take advantage of this plan.
Conclusion:
Each rental plan has pros and cons to them. Each rental option above has a number of benefits but these benefits come with trade-offs in each case. You must choose the rental plan which ticks most of your boxes and suits your company and your circumstances.