Why opticians need to look closely at 0% finance
Getting the right equipment is vital for a successful practice. We explain why the suppliers’ offer to spread the cost of the equipment might not be the best option for your practice.
If you haven’t bought new equipment for your practice recently, you may be in for some unpleasant surprises. The cost for quality ophthalmic apparatus, and even for equipment like smart mirrors for your retail area, will come as a shock, especially if it is manufactured outside the UK.
However, you may find suppliers offer finance plans which make the equipment you need a little more affordable. That new digital retinoscope, ultrasound or tonometer can start to look a little more affordable when you can spread the cost over up to five years.
In some cases, suppliers may even offer a 0% or interest-free finance package to secure the sale. It sounds tempting, and looks as cheap as buying with cash - but things may not be quite as they first appear.
We recently helped an optician in Birmingham re-equip a practice she had taken over from her father.
“Dad had been running the practice for years, and he had become a little complacent. If something was still working, he would never want to replace it.
The old equipment had given fine service over the years, but I wasn’t happy working with instruments that were older than I was.”
It pays to look closely
Borrowing money will cost money; it’s a simple fact of business life. Someone will have to pay for the money that is advanced to you up front while you pay for your new equipment in stages.
It should come as no surprise that the person paying will actually be you.
You may think that paying a little interest when you spread the cost of a large purchase is fair enough - and even that a 0% finance deal is as unbeatable as the dealer would have you believe.
It’s true that the cost of borrowing is worthwhile if it brings you the equipment you need immediately. Many types of equipment will pay for themselves with extra precision or productivity.
But it is important that you don’t pay too much. Most dealer finance is more expensive than it needs to be - for the simple reason that it includes an extra profit for the dealer. You could pay less by paying the cash price - and letting Rangewell find you the most cost-effective deal from all the lenders in the UK market.
“My consulting room needed a complete refit, and I wanted some new kit that just didn’t exist until a few years ago. I saw that I was looking at £120,000 to bring everything up to date and revamp the shop. Some kind of finance was going to be essential. If I could spread the costs over five years, it would not be quite so painful.”
What about 0% finance?
0% finance deals exist and look unbeatable. A borrower won’t pay any interest on the amount they borrow. So, if you finance a £20,000 imaging system for your practice with an interest-free agreement from the supplier, you’ll only repay £20,000. You could take a year or two to do so, but you will not pay a penny in interest.
What you will pay is an inflated price for the product itself.
0% finance deals are common in many industries. Cars and commercial vehicles are often advertised with 0% finance. As any car dealer will tell you, they are a great business builder, and people are happy to reduce their monthly outgoings by avoiding paying interest.
What they won’t tell you is how these deals are funded. Typically the dealer pays an upfront subsidy to the company providing the funding to cover the cost of the interest which they would otherwise take from you.
It helps them secure a sale, whether it is a sports car or a piece of optical equipment. But they will actually recover the cost from you, the customer.
Although a 0% finance agreement won’t seem to require the borrower to pay any interest, the supplier may already have factored the interest cost into his sale. It won’t require you to pay any interest, but you could still end up paying more overall.
“The equipment supplier offered me Hire Purchase terms that looked attractive, but I wondered if I could do better. I spoke to Rangewell, and discovered that the interest rates he quoted would mean payments almost £100 a month higher than they could find for me. I negotiated a good discount for cash, and took the finance Rangewell found for me.”
There is a solution. Get the price from the supplier – and then ask them to reduce the price to you by the subsidy amount.
Then take out a business loan, and pay for your equipment in full.
“I have the equipment I need all covered by a single monthly payment, and that payment is much lower than I would have been paying if I’d taken the easy option and gone with the dealer’s finance. Anything that makes cashflow a little easier is a good idea in my book.”
As an optician with a practice, you should qualify for a low rate on the finance you need. At Rangewell, we know the lenders who specialise in the sector, and who can offer the most attractive rates on any kind of lending. Plus we can also help you source other kinds of specialists to help you grow your business, from opticians' equipment suppliers to specialist marketers and more, with our Opticians' Directory.
If you are ready to look at new equipment for your optician’s practice, call us to see how we can save you money.