Types of Heavy Equipment Lease Financing
Your crew members can’t do their jobs without the right heavy-duty equipment. Paying cash for new or used machinery isn’t always possible, however. So how can you get the equipment you need? Learn about the most common types of heavy equipment lease financing, and decide if leasing is the right option for your business.
Fair Market Value Leases
For equipment financing, one of the most common options is a fair market value (FMV) lease. This type of lease often spans several years. When it ends, you can typically choose between returning or buying the equipment. You may also be able to renew the lease.
FMV leases can be smart choices for machines that depreciate quickly. If you anticipate the equipment losing value by the end of the lease, you can plan to upgrade without financial losses.
Dollar Buyout Leases
Most leases give you the option of retaining the equipment at the end of the lease term. However, many leases require a buyout that can add significantly to your costs.
With a dollar buyout lease, acquiring equipment is easy and affordable. This type of lease allows you to purchase the equipment for $1 when the lease term concludes.
When you opt for this type of lease, your monthly payments may be slightly higher than they would with a FMV lease. However, you’ll still free up capital when you take out a dollar buyout lease, making this a savvy decision for many contractors.
If your company frequently needs new equipment, you may already have several current leases. Before you think about taking out yet another one, consider streamlining your finances with a wrap lease.
This type of financing wraps up all of your new and preexisting leases in a convenient package. A wrap lease consolidates current leases into a single agreement and adds in any new equipment you need to acquire.
With a wrap lease, you’ll have less paperwork than you would with multiple agreements. You’ll also have a single lease payment instead of having to juggle several lease payments each month.
Sales and Leasebacks
No matter how much you plan, you can’t always anticipate your business’s every need. Buying equipment often means tying up your capital funds and paying off a loan for several years. You can’t always put your capital purchasing needs on hold for such a long period of time, though. In that case, you may need to transition a purchase into a lease.
If you own new equipment, you may be able to do a sale and leaseback, which allows you to sell the machine to another company. The buyer then leases the equipment back to your company so you can continue to use it on the job.
In some cases, refinancing is a smart strategy. Like most refinancing situations, this option only applies when you’re already paying to own equipment. For example, you might have a five-year business loan for a large machine. A few years into the loan, however, you might discover a financing option with a lower rate or better terms. In that case, you can consider refinancing with a more cost-effective lease.
While many refinancing options offer great terms, be sure to consider any processing fees or additional charges you’ll pay over the course of the lease. After all, you’ll want to make sure the lease makes sense for your business now and several years down the road.
If none of the leasing options above seem quite right for your business, consider a long-term rental instead. In many cases, renting heavy-duty equipment offers far more perks than leasing, especially if you don’t need to own at the end of the period.
Renting enables you to set aside your purchasing power and your business credit for when you really need them. Since most rental companies cover insurance and maintenance, you won’t have the added equipment costs that purchasing and leasing incur.
Renting also gives you access to the newest equipment. If you’re on a budget, you might opt to lease a pre-owned model rather than a new machine with all the bells and whistles. When you rent, you’ll get the latest technology at a price you can afford.
Whether you need equipment for a month, a quarter, or a year, you can get a long-term rental that works for you. You’ll find generous discounts on long-term rentals that can make this option even more cost-effective.
No matter what kind of heavy-duty equipment your job site needs, BigRentz offers long-term rentals that works for you. From scissor lifts and boom lifts to forklifts and backhoe loaders, BigRentz has just what you need to do the job.