Should You Buy or Lease Heavy Equipment?
If you own a construction company or other business that requires the use of heavy equipment, you may wonder if it is better choice to buy or lease. While each of these choices has its pros and cons, the answer depends on the individual needs of your company and what kinds of financial goals you have planned for your business. Before you decide to lease heavy equipment or buy it outright, there are a few factors you should consider first.
The Pros of Buying Heavy Equipment
Buying cement mixers, bulldozers and other large vehicles for your construction company allows you to have greater control in how they are used. You will not be subject to mileage fees or have to worry about what might happen if they should get damaged. Some brands have a high resale value, allowing you to make more profit if you sell them or to put more money toward a down payment on a new item on a trade in. Owning equipment also allows you to rent it out to other construction companies to increase your working capital
The Advantages of Leasing Heavy Equipment
While owning your own equipment may sound like a highly attractive prospect, there are also advantages to leasing as well. When you lease heavy equipment, it does not negatively impact your company’s line of credit or borrowing power. This may be a great advantage later on when you are ready to expand your company and want to buy an office building to house your sales and administrative teams, a company truck or take out a personal loan. You will be able to grow your company with more flexibility instead of being tied down by long-term loan payments.
Another advantage to leasing construction equipment is that you will be using 100% financing, which does not require that you put any money down. Not only does this mean that you can start using the equipment right away, many lenders offer a no-commitment trial period so that if some items are not a good fit for your projects, you can return them without losing money on depreciation. The faster you can get your equipment on site, the more efficiently your employees will be able to complete projects on time.
Which is the Better Choice?
While there are many advantages to buying and leasing heavy equipment, the best choice hinges on how you plan to proceed with your company’s finances. If you are attempting to grow your company quickly and need to foster a cash reserve, then you should consider using financing. Before you make your final choice, create a long-term business plan for your company in order to better focus on your goals.