Lease agreements are complex documents and equipment leasing companies usually draft them. To adequately determine how much you would actually need to spend when renting medical equipment, you might need to consult a leasing expert.
When people ask how much will it cost to rent medical equipment, they usually look at the rates. Unfortunately, rates can be very deceiving. Most health facilities are attracted to low “sticker prices” but the truth is, low rates don’t give you a clearer picture of how much you would end up spending just to use state-of-the-art medical equipment.
Many lease agreements come with certain risks and if they are not evaluated, may turn what was considered to be a money saving strategy into one costly mistake.
Thankfully, you can avoid making costly mistakes by simply utilizing a systematic approach to lease risk evaluation. Take these five steps to ensure all risks are properly identified and weighted in order for you to know how much it would cost you to rent medical equipment.
How Much Does It Cost To Rent Medical Equipment| The 5 Step Strategy
1. How Much Is The Interim Rent?
Interim rent is the amount of money charged for the period between when the equipment is accepted and when the lease period is set to begin. Let’s face it, equipment leasing companies are in this business to make money so they can decide to extend the interim period for as long as they can. The solution? Ensure that the interim period is limited to prevent the actual cost of renting medical equipment from escalating quickly.
2. Are Default Conditions And Notices Hard To Meet?
Lease extensions often occur when lessees are unable to meet notice requirements or go into default. Lease extensions can be very costly and can significantly increase the overall cost of your equipment. Many lease agreements have default and notice conditions that are hard to meet. For instance, your lease may require you to provide notice for things that occur frequently such as repair and maintenance.
3. Are Causality Rates In Line?
If causality rates are not reasonable, you might end up paying more for damaged or lost equipment. One mistake that many lessees make is assuming that any medical equipment lost or damaged will not be enough to make a significant impact on the overall cost. Another mistake that lessees make is failing to take into account the notice requirements for damaged or lost equipment; a mistake that often results in default.
4. How Easy Is It To Return Equipment?
Returning medical equipment is much more cost efficient than purchasing it. Since it is much more profitable to the lessor when you purchase equipment rather than return it (unless its resale value is very high), they can structure your lease agreement in such a way that returning it is made difficult.
A common provision in most lease agreements is the “all-but-not-less-than-all” clause that requires lessees to return all the pieces of equipment on time or else pay full rent for any equipment that has not yet been returned. Don’t make the mistake of assuming that you will return all the equipment at the end of your lease because in most cases this usually ends up not being the case.
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5. Is There A Fair Way Of Determining Fair Market Value?
Many equipment leasing companies will give lessees the option of purchasing medical equipment at the end of the lease period at fair market value. Sometimes, the method used to determine this fair market value is often not defined. In some cases, your lessor will set the price (an inflated price of course) and in other cases, they might agree to negotiate the price. Ensure that you specify a clear mechanism that you will use to negotiate fair market value that is “fair”.
It is clear that the total cost of renting medical equipment is not defined by the finance rates. It is determined by other factors such as interim rent, fair market value, causality rates and return and notice requirements. Once you have all these five elements figured out, you can safely calculate how much it would cost you to rent medical equipment.
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