Construction Equipment Financing - Lease Or Buy?

The business owner has to consider two options when it comes to buying construction equipment. First of all there are primarily two paths to getting the construction equipment needed. Buying the equipment outright or leasing it. Both have advantages and drawbacks.

Business Loans Can Help Buy Needed Construction Equipment

Equipment used in the construction industry in most cases will not become obsolete during the life of the technology. Bulldozers, backhoes, and other digging equipment have essentially been the same for years. If maintain properly, construction equipment will last for years past what a lease would offer.

Business owners also like the fact that once the business loan is paid off they own the equipment outright. This helps the business build accrued equity. The equity can be used later in time to help secure working capital if the need arises. This will most likely not be necessary since a good unsecured lines of credit can provide all the extra working capital they need in most cases. In terms of taxes, equipment that is owned can be counted on taxes as depreciation.

The Benefits of a Leasing Construction Equipment

The primary benefit of leasing construction equipment is that it offers great tax benefits to business owners. This is especially true in terms of what is called a "true lease", where you get a 100% deduction. If you do not know what we mean by a true lease, the Internal Revenue Service uses the term "true lease" to define how it is structured.

When the lease is structured as a true lease, the end-user can claim the entire lease payment as a business expense. To qualify for this status, the equipment must be declared at fault fair market value at the leases end. While all this sounds complicated, it really isn't. We do, however, recommend consulting with a professional tax consultant for more information on the ramifications of the tax benefits of leasing.

The fact that you can often get the equipment that you need without any down payment is one of the primary benefits to some. Businesses, like start-ups, that are not flush with cash love this aspect if they can find it. Lease payments are typically fixed for the term of the lease and give the business owner a good idea what to budget.

Choose The Best Route For Your Construction Business

Whether you choose buying or leasing, you need to consider all the facts. Things like tax benefits, your business plans, etc. are some of things you need to look at. I would advise that you consult with a tax consultant and think long and hard about the long term goals of your construction company.

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