Construction Equipment Financing:
Lease vs. Loan
Leasing construction equipment or taking out a loan to purchase both have their advantages. Which one is best for you depends on your goals as a contractor at any given time.
Before you acquire new equipment, ask yourself these questions to determine your business needs:
- How long will you need the equipment?
- Do you want to own the machine at the end of the term?
- Are you interested in keeping up with the latest technology?
- Do you want to buy out early?
- Are there tax, cash flow, and financial issues you’re trying to satisfy?
- Are you more concerned about the lease rate or the overall cost?
- Are you just looking for the lowest possible payment?
When you have a good idea of what your business needs are, compare the advantages of leases and loans to find out which one matches your needs best.
LEASE ADVANTAGES:
- Depending on the term, less money may be required upfront.
- Generally lower payments than installment loans of the same term.
- Pay for the use of the equipment, return it at lease end, or exercise your purchase option.
- Schedule equipment replacement at less cost than a cash purchase.
- Reduce downtime. Keep newer equipment with the latest technology in your fleet.
- Eliminate the task of disposing of used equipment.
- Could be less expensive and more efficient than renting equipment multiple times a year.
LOAN ADVANTAGES:
- You own the equipment when you’re done paying for it.
- You can depreciate the equipment.
- The equipment appears as an asset on your balance sheet.
- No hour limits for the time you use the machine.
- Build equity with installment payments.
When it comes to deciding whether to lease equipment or take out a construction equipment loan, there is no right or wrong answer. There’s a good chance you’ll use a combination of the two to finance your fleet and optimize your cash flow. Learn more about our equipment financing options, or see your local dealer.