There are a lot of things to think about and research when it comes to a purchasing a new coffee machine. We hope that you’ll be reading plenty of reviews and watching demonstrations to choose a machine that suits your needs. During this decision-making stage, two things you’ll want to closely consider are the machine costs and your finance options.
Coffee machines can be quite expensive, and price is a huge part of the decision-making process with most of the customers that we speak to. Something we guide them through is whether it’s best for them buy the machine outright, or to spread the cost over time through a lease contract.
We offer both leasing and purchasing finance options, and each of them are better suited to some businesses more than others. So, in this article and the video down below, we’re just going to look at the pros and cons of leasing vs purchasing a coffee machine, so that you can make the best decision for yourself.
Leasing a Coffee Machine, Explained
So let’s quickly explain what the lease process for a coffee machine looks like. For a full explainer, click here.
The first thing we’ll discuss is how long you’re looking to lease the machine for. This will typically be 3 to 5 years with shorter contracts making for higher regular payments, longer contracts leading to lower regular payments.
We’ll then start working with our trusted leasing provider who will be funding the process, and we’ll work with them to handle all of the paperwork, conduct credit checks and negotiate terms. The lease provider will take on the upfront cost of the machine, but we manage the entire process to help you get the best rates possible and handle all of the communications and paperwork.
The Benefits of Leasing a Coffee Machine
Firstly, and probably the main benefit, is that you can avoid avoid the large upfront payment and spread the cost of the machine over time. These are massive selling points for businesses with a low cash flow or capital expenditure budget.
There’s also other financial benefits including your ability to offset the lease payment against corporation tax and claim up to 19% of the payments back.
Finally is that a lease agreement provides you with the option to either own, upgrade or easily return the machine at the end of the lease. So if, in hindsight, the machine wasn’t quite up to spec for your needs or was more than you needed and you can afford to downgrade, you can easily give it back and move on to something different. Or if you are happy with the machine, you can purchase it from us for a small fee, or choose to re-sign a new lease and keep working with us getting support in terms of barista training and looking after your machine.
The Cons of Leasing a Coffee Machine
The first downside of a lease agreement is that total payments will be greater over time. The lease company is providing you with a service and taking on the upfront cost themselves. You’ll pay for this service over the length of the contract by paying slightly more than the listed cost of the machine after the 3 to 5 year period.
The second downside is that a lease locks you into a long term contract. It’s a common misconception but if you want to leave the contract early, you can’t simply give the machine back and stop paying. Instead there will be early exit payments, and so you lose a little bit of the freedom that you could have had by purchasing the machine outright.
The third downside is that you don’t automatically get to keep the machine at the end of the contract, because it’s then technically owned by us the supplier. However, I’ll caveat this point by saying that, at the end of the contract, our customers are given the choice to keep the machine either through ownership by purchasing it for a small fee, or by re-leasing the machine with us at a lower price.
The final issue to consider is that new businesses may not be eligible for a lease contract. The leasing company will do their due diligence and perform a credit check on your business, so a company less than three years old without much credit history may struggle getting approval. In this situation we would typically recommend either getting in touch with your bank and applying for a loan, to have another look at the different finance options available to you, or even look for more affordable or secondhand equipment if necessary.
Purchasing a Coffee Machine, How it Works
So, in comparison to a lease agreement, purchasing a coffee machine is a little easier to understand. Once you’ve compared your options and made a decision on both the machine and the supplier you want to go with, just get in contact with them and they’ll send you an invoice.
Once it’s paid, they’ll make a purchase order to the manufacturer and schedule in the installation, then you can typically expect to be up and running, for us at least, within 4 to 6 weeks. The supplier will usually get a discount from the manufacturer, so you should end up paying close to the recommended list price for the machine.
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Benefits of Purchasing a Coffee Machine
There are essentially two main benefits to purchasing your coffee machine upfront. Firstly is that the coffee machine becomes yours straight away, and therefore counts as a positive commercial asset (this has the additional benefit of allowing you to reclaim VAT on the machine).
The second is that when you pay upfront, you aren’t tied into any long term commitments or contracts. This has two main follow-on benefits in that you typically get the best price available for the machine because you aren’t paying interest over time, and secondly that it gives you the freedom to choose any coffee beans, barista training or servicing suppliers and you can sell the machine whenever you like with no repercussions.
The Downsides to Purchasing a Coffee Machine
Because upfront purchase is quite a simple process, there aren’t too many downsides to consider.
The most apparent downside is the large upfront cost. This is the main hurdle you’ll have to overcome if you want to own your machine outright. We would really recommend doing as much research as you can into the kind of machine you need and not just going for the most affordable option. If the ideal machine for you is just slightly out of your budget then there are always other finance options available to help you avoid buyer’s remorse, but the decision is ultimately up to you.
The second downside is that the value of the machine decreases during ownership. It’ll sit on your balance sheet as a depreciating asset, and just like buying a new car, a phone or laptop, you are probably going to make a loss if you go on to re-sell your machine. Though, on the upside, you’ll be paying roughly the list price rather than paying a premium to lease the machine just to eventually give it back.
The final thing to consider with an upfront purchase is that the machine is yours to take care of, maintain and service. With other finance options such as rental or free on loan, the supplier looks after the machine and should take care of any issues for you. If you have bought your machine outright, you might not be covered for repairs and breakdowns. That being said, there’s a good chance your supplier will offer optional cover packages and pay-as-you-go options, especially if it’s a machine that they have sold you.
In Conclusion
There are a number of positives and negatives towards both buying and leasing your next piece of coffee equipment. No matter which you go for, we want to make sure you’re setting yourself up for success.
There are two other contracts we briefly mentioned including Direct Rental and Free-on-loan which we don’t tend to offer for the majority of our customers. Learn why we no longer offer Free-on Loan contracts here, or read this article that compares all of the coffee machine financing options available to you.
If you’ve made your decision or need a little more help, don’t hesitate to get in touch.