Which financial package suits you

Simply speaking there are three methods of acquiring new equipment: debt finance, operating lease and cash.

Debt finance is more commonly referred to as HP (hire purchase), credit bail, mietkauf or finance lease. The buyer may, or may not, put down a deposit and, typically, takes out the finance agreement over a period of five years, at the end of the period the machine is fully paid for. The finance is most likely to come from a bank or via a manufacturer's finance partners.

Tony Mort, managing director of AJ Access Platforms, prefers straight HP agreements, over five years, on a variable rate, “It provides us with the possibility of paying off the remainder of what is owed at any time and selling on the machine to a customer, should we not have the required machine in stock. It doesn't happen often but it provides the necessary flexibility if we need it.”

Operating leases or renting contracts can be treated as `off balance sheet` which, says Bruce Williams, managing director of Financial Services EAME JLG, “can be very attractive for customers who want cost effective access to equipment for a defined period of time only.” At the end of the lease users can exercise an option to buy the equipment for a fair market price or return the machine to the finance house.

Fewer European companies use operating lease finance it is cheaper than traditional HP but at the end of the contract the equipment is not owned. This method of acquiring equipment often suits companies who are quoted on the stock exchange where gearing (leverage) and debt might affect share prices.

Buying with cash is uncommon, what this tends to mean is that finance has been acquired privately; either raising money through the stock exchange, private equity or external borrowing.