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Heavy equipment rental - better than leasing?

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The topic for this article is whether heavy equipment rental is better than leasing heavy equipment. So your business is in need of some heavy equipment. This equipment could be something like a bulldozer, a crane, an excavator, a loader, a soil compactor, an application machine, a smooth roller, a fork lift, a man lift, and more. It depends on whether or not you're doing something that involves dirt moving, something that involves asphalt, something that involves material handling. Maybe you're a construction company, maybe you're building homes or businesses, maybe you're just in need of that heavy equipment. Whatever you need it for, you need equipment that is in good condition, equipment that can get the job done without any hassles for repairs or anything like that, and equipment that you can get at the cheapest price possible.

Now, there are a number of ways that you can go about getting that heavy equipment that you need for your business. You can lease it, or you can go about another type of financing. Leasing has several, in fact numerous, advantages of other types of financing, like buy and borrow. Here are some of the advantages that leasing has over other heavy equipment rental financing options.

  • tax deductions
  • balance sheet management
  • incredibly good flexibility
  • solutions that are tailored to your needs
  • the ability to better manage your assets
  • write-offs that are immediately available
  • an improved cash flow
  • end of term options that are incredibly flexible
  • upgrades that should be easy
  • fast processing
  • the ability to leave your credit line open
  • 100% fixed-rate funding (this means that each payment that you make each month is fixed. It won't change. It's fixed for the term of the contract. Compare this to bank loans, which make you put down a down payment, and then has variable monthly payments. You also aren't required to have a compensating balance.)
  • tax advantages. Your monthly rental payments are a tax-deductible business expense.

If you are considering leasing your heavy equipment, you're probably doing it for several reasons. Here are some of the main reasons why people lease heavy equipment when they find that they have a heavy equipment need, such as even tractors or harvesters.

  1. Issues with bonding. Leasing gives you a stronger financial ratio. Your bonding capacity will then increase. This increased bonding capacity can help you compete for more jobs.
  2. Tax benefits. Now, of course you'll always have to talk to your tax advisor because everybody's situation is unique. However, in the majority of cases, you can deduct your monthly lease payments.
  3. Total cost. Now, figuring out the total cost requires that you consider the Time Value of Money. You'll end up saving money by leasing rather than purchasing.
  4. Off-balance sheet financing. When you lease, the equipment does not show up on your balance sheet as a liability or an asset. This is true when you are considering operating leases.
  5. Cash flow issues. Now, if you have problems with cash flow generally or at this particular time, you'll want to consider leasing. Leasing means that you probably have to put up less money initially, when compared to a loan. It also means that you'll have a lower monthly payment.

Basically, what a lot of the decision comes down to is how much cash flow you have at the time when you're deciding whether to purchase or lease. You also have to decide what your budget is going to be like in the future, and whether or not your budget will benefit from the immediate lower monthly payments of a lease or the higher, but eventually over, payments of some sort of purchase loan. Consult your financial and tax advisors.

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Posted by DF
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