Renting, leasing or buying: which pays off?
The honest answer is that it depends, but it depends on concrete things, not on preferences. This page sets the three options side by side with an example of €30,000 over 36 months, and says in which situation each one wins.
The example: €30,000 of equipment, 36 months
A fleet of around 26 workstations, or a small infrastructure project. Figures exclude VAT and use average market rate factors.
| Outright purchase | Renting (operating rental) | Leasing (financial lease) | |
|---|---|---|---|
| Initial cash outflow | €30,000 + €6,900 VAT | €0 | €0 |
| Monthly rent | n/a | €1,002 – €1,059 | €967 – €1,022 |
| Residual value at the end | n/a | No purchase option | €900 (3%) |
| Total cost after 36 months | €30,000 | €36,072 – €38,124 | €35,709 – €37,690 |
| Extra cost of finance | n/a | 20.2% – 27.1% | 19.0% – 25.6% |
| Asset on the balance sheet | Yes, depreciated over 3 years | No | Yes, depreciated over 3 years |
| Corporate tax (IRC) treatment | Annual depreciation | Rent fully expensed in the year | Depreciation + interest |
| VAT | All up front | On each rent | On each rent and on the residual |
| Ownership at the end | The company | The funder | The company, if it exercises the option |
| Fleet renewal | New investment decision | Contracted from the outset | New investment decision |
| Early exit | Free | Outstanding rents | Outstanding capital |
Neutral scenario: it assumes an independent funder, which makes its money on the finance. When the renting is provided by the manufacturer's own funder, the figures can improve considerably, for the reasons explained below. Indicative figures, calculated with average market rate factors, excluding VAT and with no services included. They do not constitute a contractual offer. The accounting and tax treatment depends on the reporting framework that applies to the entity and should be confirmed with your certified accountant.
When renting comes in below the purchase price
This is the part that is almost never explained. Not all renting is provided by a funder that only wants to make money on the finance. When it is the manufacturer's own financial arm doing it, the goal is different: to place the brand with the client.
That changes the calculation completely. The manufacturer is willing to offer terms below what the pure finance maths would give, because what it cares about is the sale of the equipment and the relationship it opens up. And it earns again at the end of the contract: it collects the equipment, refurbishes it and resells it in secondary markets, where there is steady demand for used business equipment.
The practical result is that, for a fleet concentrated on one brand, the proposal from that manufacturer's funder is often unbeatable, and can come in below what it would cost to buy the same equipment outright. It is not an accounting trick: it is the manufacturer subsidising the placement of its brand and recovering value twice.
It is also why we always insist on requesting that proposal. The manufacturer funder plays on different ground from the others, and for a single-brand fleet it is usually the cheapest of the four scenarios. For a mixed fleet, it no longer is, and that is where the others win. Without comparing, the company never knows which case it is in.
Where the difference is felt
The table shows the cost. What the table does not show is when the money goes out, and that is where the real decision lies.
An honest reading of these numbers
Against a financial lease, buying is always cheaper. You pay off the full value and pay interest on top: after 36 months, it has cost between €6,072 and €8,124 more than buying. That is the price of finance, and no amount of accounting engineering makes it disappear.
With renting, not always. It depends on who provides the finance, and above all on whether they have an interest in selling you the equipment. Anyone who says renting is always more expensive than buying is describing an ordinary financial lease, not manufacturer renting.
When the sums do not come out in favour of renting, the right question is a different one: what does the company do with the €30,000 it did not spend? If it sits in an account earning little, buying is the better decision. If it funds stock, hiring, a machine that produces, or simply avoids resorting to more expensive working-capital credit, then the extra cost of renting buys something of value.
The IRC saving still has to be added. Because the rent is fully expensed in the year, it gives back around €7,214 over the contract at a 20% rate. Even in the conservative scenario, the real difference narrows considerably compared with what the first table suggests.
Rule of thumb, in three lines
- Buy if you have surplus cash with no better use and the equipment will last much longer than the contract term.
- Always ask for the manufacturer funder's proposal when the fleet is concentrated on one brand. That is where renting can win on absolute cost, not just on cash flow.
- Choose renting if the equipment ages quickly, if you want the fleet to renew itself, or if the capital has a better use inside the business.
- Choose leasing if you want to keep the asset but do not want to tie up capital today, especially for long-lived infrastructure.
The most expensive mistake
It is not choosing the wrong arrangement. It is choosing the right arrangement with the wrong funder. Between the best and the worst proposal for the same fleet, the difference in total cost often exceeds 10%, considerably more than the difference between renting and leasing in most cases.
That is why we always submit the same request to four funders. Each one has its own ground, and none of them always wins.
If you already have a proposal in hand, we can tell you where it stands before you sign anything.
Frequently asked questions
Which option is cheapest overall?
It depends on who provides the finance. In an ordinary financial lease the company pays off the full value plus interest, so it costs more than buying. But when the renting is provided by the manufacturer's own financial arm, its goal is not to profit from the finance: it is to place the brand. It accepts terms below what the finance maths would give and recovers value at the end, by refurbishing the equipment and reselling it in secondary markets. For a fleet concentrated on one brand, that proposal can come in below the outright purchase price.
So why do so many companies choose renting?
For four reasons. Cash flow: the capital stays in the bank. Tax and balance sheet: the rent is an expense for the year and the asset does not go on the balance sheet. Operations: the fleet is renewed by contract instead of depending on an investment decision that always gets postponed. And, when the finance comes from the manufacturer itself, the total cost can simply be lower than buying.
Why can the manufacturer's funder offer better terms?
Because it does not live off the finance. It lives off selling equipment of its own brand, and renting is one way of placing it. That is why it accepts finance margins that an independent funder would not, and recovers value a second time at the end of the contract, by refurbishing the equipment and reselling it in secondary markets. The trade-off is that this advantage disappears as soon as equipment from other brands enters the deal.
How do I compare a renting proposal with a bank loan?
By the implicit annual rate. It is the only figure that makes the two comparable, because it takes in the term, the rent and the residual value. We show the implicit rate in every scenario, and we recommend you demand it from any proposal you receive, wherever it comes from.
Does VAT really make that much difference?
For cash flow, it does. On a €30,000 purchase, the company pays €6,900 of VAT up front and recovers it in the following tax period. With renting, VAT is charged on each rent, month by month. For a company entitled to deduct it, the final amount is the same; what changes is when the money leaves the account.
Want this table with your own figures?
Send us the equipment list or the estimated value. We send back the full comparison, with the actual proposals from the four funders.