Rent-Try-Buy vs. Finance Lease: Which Option Works Best for Your Hospitality Business?

If you operate a café, restaurant, or any other hospitality-based venture in Australia, you already know how crucial the right equipment can be. When it’s time to invest in items like commercial ovens, dishwashers, or coffee machines, you might come across multiple finance solutions. Two popular options are Rent-Try-Buy and a Finance Lease (a common form of business equipment funding).

In this comprehensive guide, we’ll explore how both approaches work, their core differences, and why one option might offer more predictability than the other—especially if you’re planning to keep the equipment long-term. By the end, you’ll have a clearer perspective on which path aligns with your business goals and financial strategy.

TABLE OF CONTENTS

1. What is Rent-Try-Buy?

2. What is a Finance Lease?

3. Key Differences at a Glance

4. How Does Rent-Try-Buy Really Work?

5. How Does a Finance Lease Work?

6. People Also Ask (FAQs)

7. Pros and Cons of Each Option

8. Factors to Consider Before You Decide

9. Making the Right Choice for Your Business

10. Casey Asset Finance: Your Trusted Partner

11. Disclaimer

1. WHAT IS RENT-TRY-BUY?

Rent-Try-Buy allows you to rent hospitality equipment for an initial fixed period—often around 12 months—and then decide whether to keep renting, return the equipment, upgrade it, or purchase it outright. This flexibility may appear appealing, particularly for newer businesses unsure of their long-term equipment needs.

However, the total costs can increase if you keep renewing short-term rentals, incur additional service or transport fees on returns or upgrades, or convert to certain longer-term options down the line. While the quick approval process can help businesses needing an immediate solution, it’s wise to compare total outlays to more traditional forms of finance. There are also costs in returning the equipment after the Rent-Try-Buy

2. WHAT IS A FINANCE LEASE?

A Finance Lease is a common and transparent way to fund equipment for businesses. You enter into a lease agreement for a set term—usually between two and five years—paying a regular amount (weekly or monthly) at a predetermined interest rate. In Australia, these rates typically fall between 10% and 13% per annum.

At the end of the lease, you’ll generally have the option to:

• Pay a residual (often referred to as a balloon or final instalment) to take ownership of the equipment,

• Refinance or renew your lease term if you haven’t fully paid off the residual, or

• Return the equipment, depending on your agreement specifics (though this is less common since most business owners intend to own the equipment).

• Some finance lease providers let you automatically take ownership of the asset once you’ve made two additional payments after the loan term ends.

A finance lease provides predictability: from the start, you’ll know your repayment schedule, interest rate, and end-of-term obligations.

3. KEY DIFFERENCES AT A GLANCE

Commitment

• Rent-Try-Buy: Short initial term (often 12 months) with possible month-to-month extensions.

• Finance Lease: Longer commitment (2–5 years), offering a clear path to ownership.

Upfront Costs

• Rent-Try-Buy: A security bond (potentially refundable if you meet return conditions) plus the first rental payment.

• Finance Lease: Often minimal upfront costs. Any deposit contributes directly to eventual ownership.

Flexibility

• Rent-Try-Buy: You can return, upgrade, or purchase—but watch for extra fees on cleaning, transport, or break clauses.

• Finance Lease: Fixed term with predictable payments. Upgrades typically mean either fully settling the existing lease or opening a new lease contract.

Total Cost

• Rent-Try-Buy: May be higher over time, especially if you keep rolling over short-term rentals or convert to certain long-term arrangements with higher rates.

• Finance Lease: Interest rates commonly around 10–13% p.a., which often makes it a more cost-effective solution over the long term.

4. HOW DOES RENT-TRY-BUY REALLY WORK?

1 - Application & Approval

• You apply for the rental agreement, indicating the equipment and estimated costs. Approval can be fast, ideal for businesses needing immediate solutions.

2 - Upfront Payment

• A security bond plus the first rental payment is usually due at signing.

• The bond may be refunded if you return the equipment in acceptable condition.

3 - 12 Month Rental

• You typically pay weekly (or monthly) rental fees for the agreed period.

• This initial period offers flexibility if you’re unsure about long-term commitment.

4. End-of-Term Choices

• Return the equipment (subject to transport, cleaning, and possible re-certification fees).

• Upgrade by returning your current equipment and starting a new rental.

• Buy the equipment outright.

• Continue Renting month-to-month, though this can raise overall costs if extended.

• Convert to a Finance Option offered by the provider, which might involve additional fees or higher rates.

5. Potential Add-On Costs

• Early break fees can apply if you end the agreement prematurely (e.g., 25% of remaining interest).

• Returning equipment often requires professional cleaning, maintenance, and certification before the bond is released.

Why Some Hospitality Businesses Choose It

• Minimised initial commitment is useful if business needs are uncertain.

• Quick approval process can get you operational faster.

5. HOW DOES A FINANCE LEASE WORK?

1 - Equipment Selection

• Choose the specific machinery or appliances your business needs, such as espresso machines or commercial dishwashers.

2 - Application & Approval

• Provide business details and sometimes financial statements. If your business is stable, the approval might be straightforward. Interest rates typically range between 11% and 13% p.a.

3 - Lease Period & Payments

• Terms usually span 2–5 years, allowing predictable budgeting. Payments are generally fixed, either weekly or monthly, so cash flow planning is simpler.

4 - End-of-Term Options

• Pay Residual: Most finance leases require a balloon payment at the end if you’d like to own the equipment outright.

• Refinance: If you still need more time to pay off the residual.

• Return: Not as common, but possible with certain agreements.

5 - Why Many Hospitality Owners Prefer It

• Overall cost tends to be more transparent and often lower over time.

• Clear route to ownership means building long-term value in your business.

• Steady repayment schedule reduces uncertainty in financial planning.

6. PEOPLE ALSO ASK (FAQS)

1 - Is Rent-Try-Buy Cheaper Than a Finance Lease?

Rent-Try-Buy can be cheaper short-term if you genuinely need the equipment for only a limited period. However, if you plan to keep the equipment, the repeated rental fees or conversion costs can exceed the total cost of a finance lease.

2 - Can I Deduct Rent-Try-Buy Payments on My Tax Return?

Rental payments are generally considered operational expenses and may be tax-deductible. Likewise, finance lease payments can also offer tax benefits, but specifics vary. Always confirm with a tax professional.

3 - What If I Need to Upgrade Mid-Lease?

With Rent-Try-Buy, you can upgrade, but you must return the old equipment (paying possible fees) and sign a new contract. A finance lease might require clearing the current lease first, then opting for another lease or finance product.

4 - Do I Need a Personal Guarantee?

It depends on both the finance provider and your trading history. Some finance leases may require a director’s guarantee, although established businesses often qualify without one.

7. PROS AND CONS OF EACH OPTION

RENT-TRY-BUY

Pros:

• Short-term commitment useful for uncertain or seasonal operations.

• Low initial outlay.

• Potential upgrade or return options.

Cons:

• Ongoing rental fees can add up quickly if extended.

• Early break fees and return costs can be significant

• Buying after a rental phase may significantly pricier than starting with a lease.

FINANCE LEASE

Pros:

• Predictable cost structure at generally lower overall rates (10–13% p.a.).

• Builds ownership equity if you pay off the balloon at lease end.

• Easier financial planning with fixed payments.

Cons:

• Medium to long-term commitment (2–5 years).

• Upgrading mid-term usually requires finalising the existing lease.

• Might need a deposit or personal guarantee depending on your business profile.

8 - FACTORS TO CONSIDER BEFORE YOU DECIDE

1 - Business Stability

• New startups might lean towards Rent-Try-Buy for short-term equipment needs.

• Well-established businesses may prefer the cost savings and certainty of a finance lease.

2 - Equipment Lifespan

• Premium hospitality equipment can serve you for years, making a finance lease more economical over time.

• If you only need something for a pop-up or trial period, short-term renting could suffice.

3 - Cash Flow Requirements

• A finance lease offers predictable, scheduled payments.

• Rent-Try-Buy offers flexibility but might involve fluctuating costs.

4 - Long-Term Vision

• If you plan on owning your equipment, a finance lease clearly outlines the path to ownership.

• If you remain uncertain about your future setup, the “try” element of Rent-Try-Buy might be beneficial, yet potentially more expensive overall.

9 - MAKING THE RIGHT CHOICE FOR YOUR BUSINESS

In the end, the decision between Rent-Try-Buy and a Finance Lease often hinges on how long you need the equipment. If you foresee using the same oven, refrigerator, or coffee machine for several years, a finance lease could save you money. With rates typically hovering between 10% and 13% per annum, your total outlay may be lower compared to rolling month-to-month rentals or converting to higher-rate products later.

However, if your hospitality business model changes frequently, you want to experiment with various equipment types, or you have short seasonal demands, Rent-Try-Buy can offer a buffer from longer-term commitments. Just be mindful of potential fees if you return, upgrade, or buy later down the track.

For clarity, it’s always wise to crunch the numbers. Look at a 12-month rental versus a 3-year finance lease for the same equipment; you might be surprised by the difference in total costs.

10. CASEY ASSET FINANCE: YOUR TRUSTED PARTNER

At Casey Asset Finance, we strive to help Australian hospitality businesses make confident financing decisions. Whether you’re weighing up Rent-Try-Buy or a Finance Lease, our team can guide you through the terms, calculations, and real-world implications.

Have questions or want personalised insights?

Feel free to email us at michael@caseyassetfinance.com.au or enquire online.

If you are ready to apply for our flexible financing, click here.

Disclaimer: While we strive to ensure all information is accurate and current, we cannot guarantee it at all times. The content provided is intended for general informational purposes only and should not be viewed as personalised financial advice. For tailored advice regarding your business or personal finances, please consult a qualified financial adviser, accountant, or tax professional.

Ready to Compare Your Options?

For a clear side-by-side comparison, download our FREE Rent-Try-Buy vs. Finance Lease Comparison Calculator. You’ll see at a glance how each choice aligns with your finances—helping you make the best decision for your café, restaurant, or hospitality business!