Leasing construction equipment is a practical and affordable solution for acquiring the machinery you need on the best possible terms. If you are new to equipment financing, you may still be wondering whether a lease is better than a rental or purchase. You may also have questions about the leasing process and what advantages make leasing such a good choice. Keep reading to learn more.
Making the decision to lease heavy construction equipment
There are several ways companies can access the heavy construction equipment they need, including buying, renting and leasing.
Buying
For many businesses, making a direct purchase of heavy equipment is too expensive upfront to be practical. It can also pose a risk in the long run, as expenses related to storage and equipment upgrades can make costs accumulate quickly.
Renting
Renting offers some advantages, but since you don’t own the equipment, you will have no return on your investment. Rental prices can also fluctuate depending on a variety of factors beyond your control, and you will remain heavily reliant on the rental company. If they don’t have the equipment you need when you need it, you could be stuck.
Leasing heavy equipment: a distinct advantage
Leasing is widely considered to be the best way to acquire the use of construction equipment. By choosing to lease vs. buy contractor’s equipment, you’re securing long-term access to quality equipment without bearing the full financial responsibility upfront.
With a capital lease, you could also benefit from the ability to purchase at the end of the term. You may even have the option of upgrading, which is a real advantage in view of the fact that technology continues to evolve rapidly. The tax advantages of leasing will also help your company stay competitive.
Construction equipment leasing: a five-step process
Taking the time to follow a step-by-step process can save you money and trouble in the long run. For anyone wondering how to lease construction equipment, we recommend carefully following these steps:
Step One: Assess your needs
What type of construction equipment do you need? Identify the types of heavy equipment that are eligible for financing, and decide whether you want to lease new or used machinery.
Step Two: Set a budget
Know what you can afford before you meet with and choose a broker. By clearly defining your budget, you can save time and get answers quickly.
Step Three: Get familiar with the details
If you are concerned about keeping your bank borrowing capacity or how leasing will impact your tax payments, ask your broker for more information. Remember, lease payments are 100% tax-deductible.
And keep in mind that there are different types of lease agreements. In Canada, there are two main types of equipment leases:
- Operating lease: An operating lease is typically for a shorter term and does not transfer ownership to the lessee at the end of the agreement. The lessee essentially pays for the right to use the equipment for a specified period.
- Capital lease (or finance lease): The lessee finances the equipment over the lease term and often has the option (or obligation) to purchase the equipment at the end of the term for a nominal fee. The risks and rewards of ownership, such as depreciation, often fall on the lessee.
Within these main types, many Canadian businesses also opt for seasonal lease contracts, which allow them to pay different amounts depending on the demand for the equipment according to seasonal needs (such as excavating equipment used primarily during the summer). Each type of lease has its pros and cons, so do your homework and find out which option is best for you.
Step Four: Research potential brokers
Taking your time at this stage can save you trouble in the long run. Go online to research and compare potential brokers’ reputation and experience. Check out reviews, and ask for referrals where possible. Contractors should verify whether the brokerage is affiliated with experienced partners, and whether they are well-established in the industry. A reputable leasing firm will always be easy to contact. To learn more, check out our article on How to Choose the Right Equipment Financing Brokerage Firm.
Step Five: Sign an agreement
Examine the lease carefully before signing. Reliable firms offer transparent agreements that include realistic promises.
6 Benefits of leasing construction equipment in Canada
There are many advantages to heavy equipment leasing. Some benefits will impact your business from the get-go, and others will continue to affect your operations for months and years to come.
1. Leasing can lead to a purchase
When you lease, the financing institution initially owns the equipment, but it may be possible to transfer ownership when your lease is up. This means that your payments are an investment not only in your present, but also your future.
2. Stable monthly payments make it easier to commit
Monthly lease payments are a consistent and manageable commitment. They are usually more affordable than loan payments.
3. A regular payment schedule helps you maintain cash flow
Construction equipment is expensive, but when you lease, you can acquire the equipment you need without dramatically disrupting your cash flow. By spreading the cost of the equipment throughout the lease term, you can take advantage of fewer tax obligations and numerous possible deductions.
4. Leasing brings multiple tax benefits
Lease payments are tax-deductible in Canada, and much easier to work into your budget than a large, one-time purchase. You can capitalize on Input Tax Credits by treating your entire lease cost as an operating expense. Learn more about the tax benefits of leasing equipment in our related article.
5. Lease contracts provide flexible terms
Different lenders offer a wide range of possible contracts, allowing you to choose the best possible equipment financing agreement for your particular needs.
For example, if you are leasing heavy construction equipment for the first time, or you have a start-up, leasing will help you access cutting-edge technology that would otherwise be unattainable without established credit.
Leases also allow businesses to trade out older models for new ones at very low cost, so you can upgrade when you need to and avoid the costs associated with obsolescence.
A good lease allows you to adjust to the demands of the market without compromising your financial goals. It is always appropriate to ask your broker about elements of the lease you are not sure about, including cost.
6. Lease applications can be approved quickly and easily
A lease can be approved much more quickly than a loan. Soluco Financial Group provides equipment financing approval within 24-48 business hours.
Types of construction equipment commonly leased in Canada
Can your business lease the heavy equipment you need?
The Canadian construction landscape is diverse, encompassing everything from residential builds in suburbs to massive infrastructure projects in remote territories. This means that contractors need access to a wide variety of construction equipment, year-round.
Earthmoving equipment
This category forms the backbone of many construction projects, and leasing offers a flexible way to access the necessary power and capability for excavation, grading, and material handling. It includes:
- Excavators
- Loaders
- Bulldozers
- Backhoes
- Graders
- Trenchers
Transport equipment
Transport equipment includes all vehicles and machinery specifically designed to move people, materials, and tools within, to, and from construction sites. Common construction transport equipment includes:
- Dump Trucks
- Haul Trucks (Off-Highway Trucks)
- Concrete Trucks (Mixer Trucks)
- Flatbed Trucks
- Lowboy Trailers
- Tractor-Trailers
Lifting equipment
Safe and efficient material handling at height is critical on construction sites, such as high-rise construction projects in urban centers like Montreal and Toronto. Lifting equipment for construction includes a range of construction equipment designed to safely and efficiently raise, lower, and move materials and personnel vertically or at an angle:
- Cranes
- Forklifts
- Aerial Work Platforms
Roadwork equipment
With Canada’s vast infrastructure network, the construction and maintenance of roads and highways rely heavily on specialized equipment:
- Asphalt Pavers
- Rollers
- Milling Machines
- Etc.
Make the most of fast and flexible construction equipment leasing with Soluco
At Soluco, our team is always available to answer your questions and provide guidance. Give us a call and one of our experienced team members will be pleased to walk you through the process of leasing heavy equipment. We are ready to help you access the construction equipment you need as quickly and efficiently as possible.
Trust Soluco for reputable equipment lease financing solutions tailored to your unique business needs. Contact us today!