Choosing to lease or buy equipment is one of the most important decisions business owners must make for their company. Whether it’s a forklift, a tractor, or a dozer, choosing to lease or buy your equipment is a tough decision and there are a number of factors to consider first. How much cash you have on-hand? What are the potential tax implications? What are your forecasted business needs? For many businesses, leasing ends up being the best option. And here’s why.
Breaking Down the Benefits of Leasing Vs. Buying Equipment
Leases save you capital.
Few businesses have the cash on hand to buy new heavy equipment outright and financing equipment still requires a substantial down payment that can be difficult for small businesses to pull together. Leasing, on the other hand, requires little to no cash up front.
With leases, companies have access the latest technology.
Lease terms offer more flexibility for updating equipment - as little as every 12 months. Heavy equipment technology continues to significantly advance every year. The latest technology, like a dozer with grade control for example, reduces labor costs, eliminates rework, and allows business owners to bid competitively to win more jobs.
Leases require a lower monthly payment.
The way most lease agreements are structured, companies will pay smaller monthly payments over the course of the lease than through traditional financing. This is because leases require a balloon payment or a fair market buyout at the end of the term. With financing, those payments, which include principal and interest, are split evenly over the financing period.
There are some tax advantages.
Monthly lease payments can be deducted from income as an operating expense for tax purposes. Additionally, some leases qualify for a Section 179 tax deduction which can result in significant tax savings. Speak with a tax professional about the tax implications of a lease for your business.
Leases require less certainty about future business needs.
Because equipment lease terms typically range from 12 to 60 months, business owners can focus on their short and mid-term business needs. Owning equipment comes with much greater risk if business needs change and the equipment is no longer needed.
These are just a few of the benefits of leasing equipment for your business. To learn more about our leasing options or for help deciding if buying, leasing, or renting heavy equipment is right for your business, contact our financing specialists at a Papé location near you.