Rental, or operational leasing as some would say, has come of age in South Africa. For to long we have been stuck in the mentality rutt of "I want to own all my stuff" to a more business savvy mindset where ownership is not always the astute move to make when it comes to your company's IT hardware infrastructure.

We live in an age where information and the assimilation and interpretation thereof has become paramount. It hardware on the other hand has been relegated to commodity status. We use it, then turf it.
The question now begs asking: Why would you want to own a utility that is worth almost nothing in capital value as soon as you start utilizing it?

The following seven reasons will give some insight to why rental has become the method of choice for sourcing IT hardware infrastructure in corporate South Africa.

1. Lowest Entry Cost Option

Renting is a more cost effective option than paying cash as no deposit is required up front for the initial acquisition.
In most instances the rental premium of an item would only be payable at the end of the same month if purchased before 15th of the month and at the end of the following month should the purchase take place after the 15th. This would afford additional leverage.

For small to medium businesses this is an ideal way to set up an infrastructure without emptying the company's bank account.

2. Improved Cash Flow Management

Renting has the following benefits regarding your cash flow:
• Preserves your cash
• Enables budget certainty due to fixed and regular payments
• You only pay for the period you use the asset

It also allows you to preserve your cash for appreciating assets and enables use of our cash to acquire those assets which decrease in value.
Rental also allows for the investment of capital into profit bearing endeavours synchronous to the organisations core business strategy. This is commonly referred to as the opportunity cost of capital.

3. Obsolescence Hedge

Rapid technological obsolescence places a burden on the owner of Hi-Tech equipment. With rental agreements the end-user may upgrade the equipment at any stage.

This allows for greater efficiency within the organization and productivity is enhanced by using the latest IT equipment.

Generally, on expiry of your contract term, the assets can be handed back to the lessor with no obligation to continue leasing. The lessor takes care of the issue of disposal. At the same time various technology refresh options can ensure that the latest technology is available for use in the business without causing any interruptions to operations.

4. Flexibility & Upgrading

Most rental contracts allow for easy adding and upgrading options throughout the rental cycle of the equipment whilst maintaining the same lease expense.
Inessence this means that should you want an upgrade of your existing equipment, a settlement is paid and the new unit is purchased.
Also with a rental model the flexibility to shorten or lengthen rental payments, choose your end of term options, and the opportunity to choose your funding options are also available.

5. After Tax Net Present Value of Cost

With relatively high levels of inflation, structures that defer costs will result in reductions in present value costs after inflation cost accounting.

6. Off-Balance Sheet Financing

Rental agreements structured in terms of accounting legislation are not capitalized on the Balance Sheet, thus improving liquidity, profitability and solvency ratios.

Traditional finance lease and asset purchase facilities are recorded in the balance sheet as financial debt. An operational lease, on the other hand, can be positioned as an operating expense, allowing you to minimise and predict cash outflow.

7. Income Tax Advantages

A rental is considered as an operating expense and is therefore fully tax deductable.

So next time your company needs to upgrade it's IT hardware infrastructure, be sure to consider an operational lease!

Article Source:http://www.articlesbase.com/hardware-articles/why-should-you-be-renting-your-it-hardware-infrastructure-1580645.html