Should You Buy or Lease Heavy Equipment?
When your company needs a new piece of equipment to get the job done, do you buy or lease? Before you decide, consider these factors carefully.
How often are you going to use the equipment?
One of the most important factors to think about when you’re deciding whether to buy or lease heavy equipment is the amount of time the equipment will be in revenue-producing operation versus the amount of time it will be sitting idle. If the equipment will be shut down more often than it’s working, you’re better off if that idle time is paid for by a rental house rather than by your company.
In general, if you’re going to be using the equipment at least 60 percent of the time, it will probably be to your benefit to buy or lease heavy equipment instead of rent.
Think about the kind of business you do.
Almost as important as the amount of work the equipment does is the type and location of the work it does. Does your company deal with jobs spread out over a wide geographic area? If so, it might be best for you to rent equipment locally near the job site instead of assuming the cost to transport your own equipment to far-flung locations.
On the other hand, if the nature of your business requires you to be able to move flexibly and quickly, relying on a rental company might not work well for you. Buying or leasing heavy equipment, new or used, may be your best option if you often need to have equipment on site at a moment’s notice.
Do you need the latest technology?
Keeping up with the latest technology in construction equipment and commercial vehicles is a costly proposition for small businesses. Buying or leasing heavy equipment may be the best alternative for your company when you need access to cutting edge equipment but the expense of frequently renting new equipment is too much for you.
Even if you ultimately need to rent state-of-the-art equipment, Leasing can be an option for test driving new technology to help you decide precisely which equipment is the best value for your business. Keep in mind, most leasing options give you end of term flexibility to keep or return the equipment while still allowing you to capture the rent expense for a fraction of the cost as renting.
Consider the cost of ownership.
Owning the equipment you use, of course, means that you have to shoulder the costs of ownership all by yourself. Those costs include not just maintenance, but also licensing, insurance, storage, and transportation. If you rent, many of those costs will be the responsibility of the rental house.
Remember, though, that renting doesn’t remove all the financial responsibility from your company. You’ll still have to pay operating and fuel costs, and you’re likely to still have plenty of maintenance, equipment management, and insurance bills to pay. And at the end of the day, you’ll return the rental equipment, and you won’t have the capital assets that the equipment represents.
Don’t forget the tax ramifications.
When you rent, your rental expenses may be covered by your customers, or you may be able to write them off as business expenses. However, if you buy or lease heavy equipment, you may be able to take advantage of tax benefits that can significantly reduce the cost of ownership. If you buy or lease heavy equipment that qualifies for a Section 179 deduction, for example, you may be able to save more in taxes than you actually pay for the equipment in the year that you buy or lease it.
The right choice for you depends on the specifics of your company’s business, your financial goals, and the type of equipment you need. Our industry expertise can help you to sort out all the variables and come to the decision that works best for your company, so visit our site or call us at 801-386-8222 today to find out how we can work for you.