Winter is Just Around the Corner: Should You Buy or Lease New Machinery?
While winter weather hasn’t hit quite yet, now is a good time to assess your current fleet of equipment and if it will be able to handle your upcoming scope of work and commitments. As an essential part of community infrastructure, you are responsible for keeping the areas you serve safe and running throughout the harsh winter months. Equipment downtime is not an option, especially during the winter months.
Due to the nature of winter work, it is common to switch out machines frequently, usually every one to three years, to maintain the latest, most reliable equipment. In which case, the decision to buy or lease often becomes a difficult one. In this post, we highlight important considerations, as well as pros and cons of buying vs. leasing equipment for snow and ice removal contractors.
Initially, it is important to weigh these factors in your decision-making process:
- Do you have money for a down payment to buy?
- Ownership costs vs. leasing costs
- How many hours or how many times will you use the machine?
- When your project is done, do you want to sell the machine or turn it in?
Weigh the Advantages and Disadvantages of Buying vs. Leasing
Pros of Buying:
- Long-term, buying is more economical
- You can sell the machine whenever you like
- Make modifications to enhance performance specific to your projects
- No usage or hourly limits on the equipment
- Year-end bonus depreciation tax savings
Cons of Buying:
- Your payments may be higher than a monthly lease payment
- A considerable down payment might be required to get your monthly payments similar to those of a lease
- Money will be tied up in a capital asset that’s not available for other needs
Pros of Leasing:
- Potentially lower monthly payments, and often a low or zero down financing option
- Machine will always be under the factory warranty
- Get a new machine whenever your lease ends. You can easily get a new machine every two to three years
- Pay less in sales tax, and the lease could be 100% tax deductible as an operational expense
- Lease payments are frequently less expensive than rental rates on similar equipment
Cons of Leasing:
- You won’t own the machine at the end of the lease. However, you can look into lease-to-own options
- The hours you can put on the machines are determined by the lease
- If the machine is returned damaged or with excessive wear, you could incur additional charges
- There is typically a charge associated with breaking a lease
- Long-term you will pay more money than ownership, and there won’t be equity in the machine
- No year-end tax depreciation
Clearly, there are several factors to be considered before you commit to purchasing or leasing a piece of equipment. Take the time to evaluate all your business needs for the winter season before acquiring new machines. To learn more, contact Wheeler Machinery Co.