Why Leasing FR Clothing is Not as Simple as Leasing a Car
If you’ve been tasked with researching FR clothing solutions for your company, you have likely run across industrial laundry programs in your research. Maybe you’ve even received direction from above to pursue an industrial laundry program.
What many people don’t realize is that most industrial laundry programs utilize an unusual ownership arrangement. Laundry programs – often called “rental” or “lease and laundry” programs – utilize an ownership arrangement similar to an auto lease. In both arrangements,
- The vendor owns the uniforms or auto, and the buyer enjoys the benefits of their use.
- At the end of the lease, the uniforms or auto must be returned to the vendor in good condition.
It sounds simple on the surface, but in reality leasing clothing is anything but simple.
Leasing a car is considered by upper-level management a capital expenditure, that is, money spent to acquire or improve a long-term asset. Upper management may approach leasing clothing with a similar mindset, but unlike a vehicle, clothing is not a capital expenditure.
Millions of people lease autos, and leasing is generally seen as a reasonable financing choice. There are several core benefits to leasing a vehicle:
- Since vehicles are expensive and lease payments are spread out over time, leasing allows one to drive a nicer car than he could otherwise afford.
- Leasing makes it easy for people to get a new car every three years and rolls all transaction costs into the lease payment.
- Leasing provides businesses with the ability to deduct 100% of the cost for income tax purposes.
Leasing clothing provides none of the benefits of leasing a car:
- Clothing is inexpensive – even high quality uniforms are generally affordable to purchase. Over a relatively short amount of time, lease payments for clothing amount to more than the garment’s direct purchase price.
- Upgrading or changing uniforms in a lease or rental program is extremely expensive, and often not feasible. In fact, entering into a rental or lease uniform program virtually ensures that the clothing will be in service longer than in a direct buy program.
- Both leasing and purchasing uniforms are generally tax deductible, so there is no tax advantage to leasing over buying.
In light of these factors, clothing should not be treated as a capital expenditure – it should be purchased.
Material Liabilities Inherent in Leasing Clothing
In addition to having none of the benefits associated with leasing a car, leasing clothing often results in the customer unknowingly incurring material liabilities.
For example, rented or leased clothing has to be returned at the end of the contract. Keeping track of every garment—at least 22 garments per employee—can prove extremely difficult, especially with employee turnover and disability issues. While keeping track of a leased vehicle is easy, keeping track of thousands of garments is impossible.
This issue, when combined with several other aspects of leasing or renting clothing, often turns into substantial financial liabilities at the end of a contract.
Why Clothing is Not a Capital Expenditure
As capital expenditures, vehicles are expensive, last for a decade or more and offer limited tax deductibility when purchased.
Clothing, on the other hand, is generally inexpensive, has a comparatively short useful life, and can often be deducted as a business expense when purchased. In short, the benefits of leasing a vehicle do not translate to leasing uniforms.
Still on the fence between direct purchase and laundry rental programs for your FR clothing? Need more information to take up the chain? Learn more:
- The ins and outs of laundry rental contracts
- Pricing and costs of laundry rental programs
- Six things to consider before choosing a laundry rental program
Or, contact Tyndale at 800-356-3433 today to learn more about our Choice Direct Purchase Program.