Lease Or Loan: How To Choose The Best Option To Finance Heavy Equipment

Contractors, farmers, and small business owners often lack enough cash to purchase heavy equipment outright. Even if they do happen to have enough liquidity to buy an expensive machine, they may not want to invest it in a single purchase that will make it unavailable for other purposes.

 

 

Fortunately, you can acquire new or used construction machinery, heavy-duty trucks, farm implements, and other equipment without a full capital expenditure to disrupt your business’s cash flow. If you need the asset for longer than a reasonable rental period—as in months or years instead of weeks—the question comes down to either leasing the equipment or taking out a loan to buy it.

 

In this post, we’ll examine equipment leasing and financing options and discuss their advantages in various situations. We’ll also explain how CurrencyFinance makes it simple to secure financing for an equipment upgrade or replacement with the best possible terms.

 

Lease vs. Loan: What’s The Difference?

 

When considering your financial options for equipment in a lending or leasing situation, the most basic question to ask is: Do you ultimately want to own the asset or only use it for a period of time? Financing is the easier path to ownership, while a lease may be the cheaper way (in the short term) to secure the use of a machine for a year or three.

 

Both a loan and a lease spread out payments over time to minimize the impact on your company’s cash flow management. Leasing and financing also both allow you to start using the latest technology right away, although they differ in their approach.

 

Equipment Leasing Benefits

 

You can think of a lease as a long-term rental, where you are called the lessee and the owner leasing the equipment to you is dubbed the lessor. Leasing equipment often costs less than a loan in the short term, especially if you don’t need to make a down payment along with the customary security deposit. A lease generally has a lower month-to-month cost than a loan, depending on its fees.

 

The lease terms and conditions may limit the hours and wear and tear you can put on a machine. They may also spell out your options for when the lease period is over (lease maturity), such as returning the equipment, trading it in for a newer model, extending the lease, or buying the machine. In addition, different types of leases have different tax implications.

 

Capital Lease

 

A capital lease, or finance lease, usually gives you a purchase option, or the chance to buy the equipment at the end of the lease period with a balloon payment. This payment can be minimal or considerable, depending on the lease terms and the equity you have built with each lease payment.

 

During a capital lease period, you pay the insurance and equipment maintenance costs as though you were the owner. In addition, you can count the machine as a liability on your taxes and write off the equipment depreciation and interest you pay.

 

Operating Lease

 

With an operating lease, the lessor retains ownership of the leased equipment. This means the owner (not you) is responsible for the maintenance costs of the equipment. You won’t be able to claim the equipment as a liability on your tax forms. However, operating lease payments can be considered operating expenses, which you can deduct from your taxes.

 

You can return the machine whenever you are done using it and cancel the operating lease without paying a penalty, although you may be obligated to give prior notice first. The lease agreement may let you buy the machine for its fair market value, which may or may not be cost-efficient on top of the lease payments you’ve already made.

 

Equipment Financing Benefits

 

Equipment financing lets you buy a machine or truck by taking out a loan, which you’ll pay off in typically monthly installments until you own the equipment. With interest, your monthly payments will probably be higher than with a lease, although you can reduce your monthly cost if you’re able to get a longer-term or make a larger down payment upfront.

 

Some advantages of financing an asset may include:

 

• Lower interest and insurance rates
• Tax deductions on depreciation, fees, and interest payments
• The ability to sell the equipment at any time without a penalty

 

You can claim the machine as an asset on your balance sheet. As you pay down the loan, you’ll pay for maintenance, insurance, and other equipment life cycle costs, but you’ll also be preserving your capital through ownership of the machine and its equipment resale value. You may also be able to take advantage of major tax benefits such as the IRS Section 179 tax deduction or bonus depreciation.

 

 

How To Finance Equipment

 

CurrencyFinance simplifies the heavy equipment financing process. It’s fast, easy, and secure.

 

Equipment Financing Rates & Terms

 

CurrencyFinance has a deep familiarity with the heavy equipment market. It automatically pinpoints your most competitive rates for a term loan, whether in-house or from a lending partner. The company does the work of identifying financing of up to $500,000 with the lowest available rates and the best possible terms.

 

Currency offers:

• Low, fixed interest rates
• Financing with little or no down payment
• Flexible repayment terms of up to 72 months
• Electronic documentation for faster processing
• Pre-qualification with a soft credit pull

 

What Equipment Can I Finance?

 

CurrencyFinance makes loans happen for construction equipment such as wheel loaders, crawler dozers, forklifts, skid steers, and mini excavators. Commercial truck buyers can finance day cabs, sleeper trucks, and dump trucks through Currency, as well as semitrailers and specialty trailers.

 

Currency also helps with farm equipment financing for tractors, combine harvesters, planters, and other machinery. The company also unearths the best loans for motorsports and powersports vehicles, including utility vehicles (UTVs) and all-terrain vehicles (ATVs), plus golf course mowers and other professional turf equipment, and recreational vehicles (RVs) such as motorhomes and travel trailers.

 

Aircraft buyers can use CurrencyAir for competitive lending options on piston, turboprop, and jet airplanes and helicopters, including older and less expensive models other lenders may turn away.

 

 

How Do I Apply Online For Financing?

 

Applying for a loan through Currency takes just a few minutes with our simplified online form. A dedicated Currency financing specialist will work with you from start to finish to secure the best rates and flexible payment terms.

 

If you’re considering buying a machine or truck offered for sale on MachineryTrader.com, TractorHouse.com, TruckPaper.com, or another Sandhills Global site, click the Apply for Financing button on the listing. The application form will pull in the make, model, and other details.

 

Depending on the lender, it may need to see your business or personal credit score and details on your business’s cash flow management (monthly and yearly revenue). You also may need to provide tax forms indicating the length of time you’ve been in business. Read our documents checklist for details.

 

Before long, your Currency rep will help you finalize your loan and answer any questions. Reach out today and bring your operation up to the next level with new or used equipment financed through Currency.