Is it better to purchase or lease landscaping equipment?
Professional landscapers across the country are already in the mowing season, but it’s never too early to start evaluating your fleet and planning your next machine purchase.
When landscapers start evaluating machine options, they will rely on dealers to help them select and purchase equipment. As a committed partner to landscaping companies, it is vital for dealers to advise customers on decisions that will affect their business financially. This is especially true when deciding whether to lease or buy equipment.
Just as important as the machine you buy is the way you pay for it. Choosing the right type of financing when purchasing new equipment has a direct impact on your business.
Do you feel overwhelmed by the various options?
We go through each purchase method and benefits, and help streamline the process for you.
Decide how you want to pay for your equipment
When buying a new machine, there are several options available to help you maintain cash flow over time. First of all, you have to decide whether you want to pay for the machine all at once or rather spread the payments over time using a leasing or installment loan. If financing is the preferred method, it is important to determine the correct type of financing based on your unique business needs.
There are three main types of finance: leasing, installment credit, or revolving credit. Each type of financing has its own advantages, but all three offer the possibility of generating income while paying the remaining balance.
Set up as a long-term contract, an operating lease stipulates a fixed payment over a fixed period, often a term of two to three years. At the end of the term, you have the option of either buying the machine or returning it to the dealer. One benefit of an operating lease is that it offers lower payments compared to other types of financing, which improves your cash flow year round.
Another benefit is that you can change machines every two to three years to ensure that your fleet is equipped with new equipment. This can help reduce the risk of potential downtime, minimize maintenance costs, and bring you the latest innovations and technologies.
Another benefit of leasing is the ability to deduct 100 percent of your lease payment as an expense, which reduces assets and liabilities since you are not the owner of the equipment. Leasing also receives bank lines of credit for other business purposes. In addition, your dealer may be able to match the lease period with a guarantee period. This ensures that the machine is under warranty for the entire rental period.
How is the equipment used?
It is important to consider how the equipment will be used before deciding whether to rent it. Lease terms often limit working hours and require the machine to be free of damage when it is returned, which can be a problem during operation. With snow and ice-specific equipment, however, the machine is only used seasonally, so hour restrictions are not always an issue. If you are considering an operating lease, speak to your dealer about how you intend to use the equipment to determine if it is the right solution for you.
While installment loans also allow payments to be spread over time, in contrast to leasing at the end of the loan period, the customer is the owner of the device. This means there is no hourly limit and damage is not a problem, which makes it ideal for a customer who could put many hours on a machine. If you decide to take out a loan, check with your dealer or lender to see if there are any special financing offers. Sometimes financial institutions offer incentives such as zero percent interest for a period of time that can help you save money in the long run.
A revolving loan or revolving account is another funding option. This option is mostly used for smaller purchases but should still be considered for your business. A revolving loan is essentially a credit account that allows you to add parts, attachments, gadgets, and other small fees that are paid off monthly. Financial institutions can also offer incentives for these types of accounts. If you are managing multiple crews this is ideal as multiple people can go to a dealer for parts and other items if needed.
Close cooperation with your dealer
It is important to work with your dealer to discuss your device requirements. When you buy equipment such as a compact tractor or a front mower, attachments and attachments enable the equipment to be used in the summer months and can be included in the overall financing of the machine.
When speaking with your dealer or lender, it is important to have answers to some critical questions that will help you determine the right type of financing for your business:
1. How long will I use this device?
2. Do I want to own the machine or operate it at the lowest total cost?
3. Am I interested in keeping up with the latest technology?
4. Is there a financial advantage for us to lease or own at this point in time?
Discuss your answers with your dealer or lender to find out which type of financing makes the most sense for you.
Some manufacturers are also providing funding, such as John Deere Financial, to streamline the process. These manufacturers are in touch with your dealer, are familiar with your business needs, and offer bespoke financing such as seasonal payments, lease damage waivers, and hour offs to maximize your cash flow. When it comes to financing, there are often many options available, depending on the company, so an expert can help you find the best solution for you.
Also consider other options including attachments, attachments, maintenance and parts. What many customers don’t realize is that additional options can be built into a financing package, giving you all the tools you need to run your business with one monthly payment. Financing packages allow you to improve your cash flow and simplify your operating costs.
Make a wise choice
Buying or leasing a piece of equipment can seem overwhelming, especially when trying to determine a financing strategy that will be beneficial for your business. Work with an expert like your equipment dealer who knows the pros and cons of each financing option as well as your company to help you make the right decision. Your dealer is committed to your business and strives to help you succeed. When you know your options and your business needs, you will have a new device and be up and running in no time.