Heavy equipment and industrial machinery is quite expensive and usually a one-time investment. As a business owner or operator, you understand how a single error can cost hundreds, if not thousands of dollars.
Flexible lease options for heavy machinery are agreements that allow you to finance a piece of heavy machinery over time. Some alternatives, such as a Capital Lease or a Sale-Leaseback, allow you to own the piece of equipment thereafter, while others, such as an Operating Lease, allow you to utilize the equipment temporarily. This is very dependent on your company’s needs, capital, budget, and what you’re searching for after the leasing term is up.
Some flexible lease options include the following:
- Capital Leases: Also known as “$1 buyout leases,” capital leases guarantee fixed monthly payments in addition to a cheap asset purchase price when the arrangement comes to term. This is ideal if your goal is to purchase the equipment specified in the buyout terms and own it long-term for your organization.
- Sale/Leaseback: If you own an asset, this is a unique financing option. Instead of waiting for and being authorized for a loan, you can use your own heavy equipment as collateral. A sale leaseback essentially means leasing a piece of equipment that you previously owned. You can continue to utilize your equipment while saving some money for other business expenses or improvements.
- Operating Equipment Lease: This flexible lease option is frequently referred to as a “fair market lease”. This is usually the less expensive choice because the lessee can return the equipment at the conclusion of the lease or buy it for market value. The leasing payments are tax deductible because they constitute part of the operational expenditures. An operating lease is often used to meet short-term business goals and acquire equipment at a lower cost than renting.
- Purchase Upon Termination (PUT) Lease: Similar to a Capital Lease, this type of lease sets a price for machines when the lease expires. The necessary purchase price might be 15%. The goal is to reduce lease payments, making it less expensive monthly than a Capital Lease, while limiting risk at the end of the term by a commitment to purchase the asset.
Advantages of Flexible Leases for Heavy Machinery
The equipment provider enters into a lease with you, just like a rental arrangement. This is drafted in a lease agreement and specifies how much it will cost each month, what is covered by the lease, and any purchasing terms once the lease expires and you desire the piece of equipment.
- Predictable Budgeting & Healthier Cash Flow
- Able to upgrade/update your heavy equipment easily
- Offers you immediate taxable benefits
There are some instances where you have the ability to terminate the lease and they will be specified in the contract. If you are looking for a professional equipment leasing and financing company in Abbotsford, rely on no other than Sandhu & Sran Leasing & Financing.
