Lab Equipment: Buy, Lease, or Rent?

Whether you should buy or rent your equipment depends on the type of research you’re doing, how often the equipment will be used, and a variety of other considerations.

The lightning-fast pace of technology has one big downside: the rate of obsoletion. Replacing outof-date equipment every couple of years requires a big investment, and sometimes the cost is prohibitive. Depending on a number of variables, it makes more sense to lease or rent equipment for some labs especially for short-term research projects and startups.

Laboratory managers and researchers have to consider several factors when deciding whether to buy their equipment or not. Credit history, the anticipated project lifespan, and tax implications are a few of the factors that must be taken into account when choosing a “procurement model.” Each of these three models offers different benefits and downsides, and, often, the best choice depends on the piece of equipment itself.

Buy

A scenario analysis by Lab Manager magazine shows that purchasing laboratory equipment outright only makes sense if it is built to last for at least three years. If the machinery will be operated frequently and can sustain a long life with a consistent level of performance, buying is worth the investment. Equipment “used every day or every week continuously in the research and development process” falls into this category, according to Lab Manager.

Smart shoppers give their business to manufacturers that provide a warranty and repair services. Inevitably, large and complex equipment needs maintenance to survive the day-to-day wear and tear over the course of many years. Research projects that require customization of lab equipment also necessitate a deal that includes such alterations by the experts that built the machine. Trying to make the alterations oneself could result in broken machinery that is no longer covered under warranty after tinkering by the new owner — a potentially expensive error.

With alteration and maintenance services built-in, finding affordable equipment — new or used — becomes a real challenge. Organizations may need to pay top dollar to ensure a high degree of quality and customer care. For this reason, Lab Manager explains, “major pharmaceutical and life science companies, contract research organizations, and government research institutes” are the primary buyers of equipment. They tend to have the necessary cash and use expensive tools frequently enough to justify the cost.

Banks do offer loans for purchasing lab equipment for those willing to take on debt in order to own. However, the added cost of interest combined with the depreciating value of the devices often make this option less appealing than leasing or renting. Generally, medium- to low-end equipment is the best to buy, rather than invest a large amount of funds in a high-end piece of equipment that may not be used frequently.

Lease

Researchers often procure high-end equipment through a lease rather than buying. Companies with small budgets, universities, research and development labs, and companies from chemical, agricultural, and other industries rely heavily on leases, according to Lab Manager.

Leasing offers more flexibility and comes in two forms: capital leases and operating leases. A capital lease, sometimes referred to as “rent-to-own,” means that the lessor transfers ownership to the lessee at the end of the lease period. Interest rates are often higher than operational leases because the lab will eventually own the equipment — a similar situation to taking out a loan to purchase.

Lessees need to make sure that the lease includes the same services as the warranty that would come with an outright purchase. Maintenance and customizations are generally included in the package, and any capital lease without these stipulations should be avoided. Because the lessee eventually takes ownership, they want to know that the equipment has been well cared for and has a lifespan of more than three years. A capital lease also only makes sense for machinery that is not subject to frequent upgrades, as it could otherwise become obsolete.

Operating leases work well in the case of shorter lifespan equipment that needs to be replaced in three years or less. Lessees do not own the equipment at the end of the term but are also not responsible for buying newer versions of the devices. Instead, they can usually opt to upgrade if a new version is released during the term of the lease.

For projects that require customized equipment, an operating lease is not an option. The equipment is rented to other labs after the end of term, so it needs to stay in its original condition. Research that requires alterations to the machinery will need to find a capital lease or the funds to purchase the device outright. Only maintenance and other standard services are included in an operating lease.

Rent

Similarly, alterations cannot be made to rented equipment. Renting fits best with short-term projects that need the machinery for less than a year. Lab Manager claims that the best type of equipment to rent is that which is only occasionally used, generally on an ad-hoc basis, such as gas chambers. Rental contracts are available for low-end equipment as well.

Renting is more expensive in terms of price for the amount of time the equipment is in a laboratory, so it is not advisable to pursue renting as a long-term solution. But, it is far more convenient and sensible when a tool is only needed for a matter of days or weeks. “Acquiring equipment for temporary usage through buying or leasing incurs more cost and less return,” says Lab Manager.

Private organizations and universities are the largest renting demographic. They mostly go through equipment distributors for their short-term device needs. Often, rental equipment has been put to use in many labs by many different individuals, so the best type of equipment to rent is durable machinery with a relatively long shelf life.

Rent, lease, or buy — each procurement model serves a valuable purpose. The tough part is picking the best choice for each device. Laboratory managers and researchers can save serious money and reduce liability by selecting the right equipment plans for their projects. By keeping in mind the frequency of use, cost, and nature of the machine, the best option should quickly come to light.

— Mapes is a Washington, D.C. – based freelance writer and a
frequent contributor to Endocrine News. She wrote about the
“Plan B” pill and overweight women in the August issue

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