Leasing Heavy Construction Equipment
Capital is key in order to operate a successful business, especially when the economy is as fickle as it is today. The heavier your cash flow, the greater amount of growth your company will experience. This is especially relevant in the construction industry. For all types of construction, the goal is to complete projects in accordance with plans and specifications, on time, within budget, and at the lowest possible cost. A construction company’s success and failure could very well depend on adding a fourth crane to your garage.
Equipment is the single largest investment for a contractor, with costs running from $15,000 to more than $100,000 depending on the model and quantity. There is a solution to cut equipment costs and reduce overhead by way of equipment leasing.
According to the recently released Equipment Leasing and Finance Association’s Annual Equipment Finance Report, construction companies and trucks/trailers were deemed the biggest winners as far as benefits reaped from leasing equipment. In one year, construction leasing grew almost 2 percent, maintaining its No. 3 placement in the $6-billion equipment leasing industry.
Through certain Construction Equipment for sale leasing plans, a contractor is able to select from leasing options that allow the company to trade in equipment for the latest upgrades. This is ideal in the construction business, where there are frequent advancements made to equipment requiring contractors to constantly update in order to stay competitive.
As the owner of a new roller compactor and lowboy tractor, understands the benefits of leasing new equipment. “Once you understand how leasing works, the pros are obvious. The tax benefits are great because the depreciation allows for a write-off.”
The leasing company (the lessor) contracts the construction company (the lessee) to lease the equipment and pay for it monthly over a fixed time frame of typically two to five years. The lessee will sign the contract for the type of lease that caters to their financial capabilities. The lease can also depend on whether the lessee wants to own the equipment at the end of the lease term or “return” the equipment to obtain a more up-to-date replacement.
All business owners, small and large, can be lessees. Leasing companies secure the funds from the bank. More often than not, lessees are already pre-approved.
The leasing company, if it’s a good one, will handle all the paperwork, make sure everything is completed and coordinate with the equipment vendor. It is also the leasing company’s responsibility to ensure that payment and delivery are in sync with the schedule of the construction company, and to conduct any customer service needs.
Companies can lease everything from a single bulldozer to 10 concrete mixers. The business owner has a non-cancelable obligation to pay the lease fees and maintenance costs relating to the equipment during the lease term. The lessee also bears the costs of equipment damages and insurance.
