Why More Companies Lease Heavy Equipment
Construction companies are choosing to lease heavy equipment at a greater frequency these days, and for good reason. There are a number of advantages to leasing when compared to buying equipment outright, especially for businesses that are just starting out. If you are in the process of deciding whether leasing or buying is a better choice, here are a few reasons why some companies are choosing to lease and why they believe it is better for their bottom line.
More companies are leasing heavy equipment because it offers them a tax break. For example, monthly payments for leasing can be deducted as operating expenses at the end of the year. This means that if you lease heavy equipment at an operating fee of $2,500 a month, this will result in a total deduction of $25,020 on your business taxes. In contrast, buying or renting equipment does not allow you to include such deductions.
Because heavy equipment is subject to obsolescence, companies are turning to leasing so that they can turn in older models at the end of their lease in favor of new ones that include upgraded features and allow their employees to work more efficiently. If a machine or large vehicle should become obsolete or no longer meet construction safety standards, the company leasing it can turn it in and adjust the remainder of the cost toward the lease of an updated model. Equipment that was purchased outright and is now obsolete will be difficult to sell, resulting in a loss of money for the company.
Business owners who have only just launched their own construction companies lease heavy equipment because the payments are less of a drain on working capital. For example, if the company is in need of a new cement truck, buying one will require a sizeable down payment and other fees that are connected with buying a vehicle, and the monthly payments are typically higher as well. Companies that choose leasing instead will avoid having to make large down payments, make lower monthly payments that can be adjusted during times when construction work slows and allows them to save working capital.
The decision to lease heavy equipment is one that must be made depending on your company’s specific needs and goals. However, there are many advantages to leasing that may allow you to save time and money. Before you lease, shop around for the best interest rates and look into which lenders offer flexible terms that will allow your company to grow.