The Small Business Times

Benefits Of Leasing A Commercial Coffee Machine?

There are a few reasons why you would want to lease a commercial coffee machine. This includes Commercial Bean To Cup Coffee Machines and also traditional espresso machines, both being covered by the same leasing options.

The other popular methods of acquiring a coffee machine are Outright purchase and rental. Outright purchase simply means you pay for the coffee machine up front, as you would a regular transaction.

With a rental agreement you pay a monthly amount, agreed with the supplier, over a given period of time – usually 24 months. A lease agreement is very similar to a rental agreement with a few major differences, and it’s these differences that make a lease agreement significantly more attractive than a rental agreement.

Difference Between A Commercial Coffee Machine Rental And Lease?

Leasing a coffee machine differs mainly from a rental agreement in two ways. Firstly, lease payments are very competitive in the finance industry especially over popular time periods such as 3 or 5 years.

This competition drives prices and rates down. In a lease you typically commit to the bank for 3 – 5 years which will allow the bank to cover the cost of the item and then their interest.

In a rental the commitment can be much shorter so there is a lot of risk for the bank. Many simply do not offer it in their portfolio of finance arrangements for those that do they will take the risk, but only at a hugely elevated price typically way in excess of even an expensive 1 year lease.

Additionally the coffee machine is returned to the supplier at the end of the rental period and you will have to pay for any wear and tear deemed in excess of what would be normally be incurred over the time period. 

Whereas with a lease, there is an option to make a further payment to own the coffee machine, by a third party at the end of the agreed lease period. In cars this payment is referred to as a balloon payment. 

Renting A Commercial Coffee Machine

A coffee machine rental agreement is usually typically over a shorter amount of time when compared against a lease. It can, at a glance look preferable if you are not sure of the coffee demand or whether another machine model would be suitable for your business.

However, with a standard machine being covered by just three coffee sales per day on a lease payment this makes rentals not very popular at all and because of this are rarely picked by companies.

Renting a coffee machine can be a viable option if outright purchase is not, allowing you to split the cost of a coffee machine over smaller, monthly payments. It usually includes installation, training and maintenance options.

Rental is the most expensive of the options in the long term as there can be no end to a rental. Many businesses simply forget and only when they look back at how much they have spent quickly realize and try to switch to a lease. Unfortunately, at this point, it is too late.

You can also be exposed to things like compound interest (interest applied to interest). Also, a rental is always has much higher monthly payments as the commitment that you give is shorter than a lease, the bank therefore class it as high risk and charge accordingly for it.

Leasing A Commercial Coffee Machine

If you have the options of both rental and lease options on the table, there is no benefit renting a commercial coffee machine by comparison.

Renting will always be more expensive on a like for like basis as you are committing to a lesser period (the amount this will differ will vary from supplier to supplier). 

Who Can Lease Commercial Coffee Machines?

If you are a homeowner with an average or better credit rating, leasing will normally be a viable option for your business and is normally the best option if you are accepted for a lease.

Businesses with good credit and established over three years can also be accepted for leases. If you don’t fit those criteria, then you will likely need a guarantor.

It is better to be upfront and honest about your situation as if you lie it will show up on a credit search and then the bank or leasing company are unlikely to change their mind as you have not been honest initially. Contact us if you would like someone to guide you through this process.

Commercial coffee machine leases are 100% tax deductible whereas outright machine purchases are not unless you are able to put them through your annual plant and machinery allowance (speak to your accountant for details).

Choosing a shorter lease means higher monthly payments, but with the advantage of ending the lease sooner, or the option or extend the lease at a lower monthly payment in the future.

Leasing a coffee machine is just like buying a machine outright in terms of the machine and package you get. It just allows you to spread the cost of the coffee machine and hit profit much quicker than if you had the sunken cost of buying the machine upfront.

Take the following example two examples 

  1. An office coffee machine that can provides up to 150 coffees, hot chocolates or mocha’s per day for the staff.

The Franke A600

Outright purchase = £7,495 + VAT

Lease over 5 years = £37.49

Cost to provide 150 coffees per day on lease (Mon-Friday) = £0.29 per coffee

  1. A machine that was used in the UK Barista Championship manufactured by a top Italian manufacturer.

The Spaziale S40

Outright purchase = £5,348 + VAT

Lease over 5 years = £27.52

Cost of machine per day (6 day week) = £4.57

Number of coffees to be sold at £2.85 to cover machine (cost of coffee £0.25 per cup) = 4.57/2.60 = 

1.77 coffees per day to cover the lease cost!

Ask yourself this, would giving your colleagues a coffee that would rival the local coffee shop for £0.29 be a great work incentive?

Or would having an ex UK Barista Championship coffee machine sell you just one more coffee per day? I would imagine the answer to both is a resounding, yes!

Lastly as leasing can also allow you to purchase the industrial coffee machine that is right for your business rather than the one that budget permits. It can be a great investment as most coffee machines hold their value well too.

So on a 3 year lease on most commercial coffee machines this should be equivalent to roughly half of its life-span and if you look after your machine really well it’s not unusual for it to last even longer than 6 years.