Construction equipment is often extremely expensive, so it is important that businesses find easy, effective, and cost-efficient ways to acquire the equipment they need. Equipment leasing is the smart way to finance essential heavy equipment for your projects.
Equipment can often be one of the largest capital expenditures, alongside labor costs, that a construction company needs to manage carefully in order to remain successful. When this equipment is acquired through leasing equipment companies, business productivity can be increased, workplace safety can be improved due to more up to date equipment, and working capital can be reallocated to other areas of the company to promote further growth. With many construction companies now starting to seriously consider construction equipment leasing for their business, it is important to thoroughly understand the process.
Here are the pros and cons associated with construction equipment leasing that need to be considered before making your final decision.
Pros of Construction Equipment Leasing
When compared to more traditional methods of raising funds, such as loans from banks, construction equipment leasing is a quick and easy process where you can get the equipment that you need quickly. This allows you to begin work on projects earlier, complete them more quickly, and take on more jobs than previously possible.
Another main benefit of equipment leasing is that it requires less capital than other financing options. This saved capital can then be reallocated towards other areas of the business. Once your leasing agreement has been completed, you will have the option to purchase the equipment if you feel you will need it longer. This makes equipment leasing an effective method for testing whether specific pieces of heavy machinery are appropriate for your business without having to make a long-term and expensive commitment.
Typically, there will be no direct payment needed relating to the equipment itself and usually there will be no blanket lien placed on your business as the equipment itself will act as collateral. Transportation, storage, or routine maintenance regarding your equipment, all of which can be extremely expensive will be handled by the equipment leasing company.
Equipment leasing will not affect your credit line and comes with many tax benefits that will further help your finances. Also, you can easily acquire up-to-date equipment that better conforms with any new regulations, while the risk of machine obsolescence is reduced dramatically as a result of equipment leasing practices.
Cons of Construction Equipment Leasing
While there are very few downsides to equipment leasing, there are some matters that will need careful consideration. From a financial perspective, you are not going to be building any equity in the equipment when you lease it. Holding equity in your construction equipment means it can be used as collateral for future credit needs, something that is not available through leasing.
Over time, if you are not careful, the cost of leasing can build up leading to a situation where you are paying a higher cost for the equipment than if you had purchased it outright. A long-term lease can often have additional costs or penalties related to early returns, contract breaches or damage caused by improper usage not covered by the standard agreement. You need to be completely aware of the terms you are agreeing to before signing to avoid any extra or unforeseen costs. You can avoid these issues by partnering with a reputable leasing company who is invested in your long term success.
Also, the equipment or machinery you need may not be available when you need it, depending on the equipment leasing company you are working with. This is a problem that will not occur if you own the machine outright.
Final Thoughts
As with any major decision you need to make regarding the running of your construction company, the effects of equipment leasing needs to be calculated before choosing how you acquire your equipment. There are many pros and cons that need to be considered, but speaking with experienced leasing equipment companies who specialize in the construction sector will help you gain a better understanding. If you are looking to keep your cash flow open and fully understand your upcoming needs, construction equipment leasing needs to be considered as an alternative to just purchasing equipment outright.
