Keeping cash at hand makes it much easier to seize a business opportunity before a competitor can arrange financing, or to weather a downturn that cripples your competition. Using cash to invest in your business provides returns that are far higher than the interest rate of a rental. It is very clear that renting is the best choice, yet some people are still reluctant to choose it.

“We keep our assets for at least four years, so isn’t owning cheaper than renting?”

A business may do a net present-value comparison between rental and purchase, and conclude that owning is cheaper. But as we showed above, the cost of cash is usually higher than the debt rate. Cash is a scarce asset on the balance sheet, and a reasonable position is to use the Weighted Average Cost of Capital as the discount factor. Even if a business believes today that the equipment will be kept for a long time, a lot of things can change. A 36-month fair market value (FMV) rental preserves substantial future flexibility at little to no additional cost.

“Why don’t we just finance it with short-term credit?”

Short-term credit is an important resource to financial managers. But even when rates are comparatively low, and particularly in a challenging economic environment when short-term credit is often hard to come by, it makes more sense to use an external, more cost-effective source of financing for IT investments, and to preserve short-term credit for other core investments.

Unlike short-term credit, a fixed-rate rental ensures a regular, low monthly payment that’s easy to budget for. It reduces the total cost of ownership, since the lease payment reflects the residual value. It also eliminates end-of-rental disposal issues. And a hardware rental helps your customers meet changing capacity requirements by letting them add or upgrade systems at any time, during the rental term. This is what rental can do for your business, while short-term credit offers none of these advantages.