| To the uninitiated, replacing heavy-duty machines | | | | leasing arrangement frees up valuable capital and |
| is a simple matter of selling the old units and | | | | offers decision-making flexibility. Such an |
| buying new ones. Experienced managers know | | | | agreement provides immediate access to new |
| better. They understand intuitively that this type | | | | vehicles and machinery with a minimal upfront |
| of machinery is extremely expensive and | | | | investment. This is a significant advantage. New |
| represents an enormous outlay of limited | | | | businesses are often starved of operational cash |
| resources. When operating a fleet of excavators, | | | | flow; a lease agreement helps them conserve |
| back hoe loaders, cement trucks, and similar | | | | their resources. Even longstanding companies can |
| vehicles, they must maintain constant vigilance | | | | leverage a lease by directing their resources |
| over how they spend those resources. | | | | toward areas that promise more liquidity or a |
| Every business that relies upon heavy machinery | | | | higher rate of return. |
| must carefully design a capital expenditure | | | | There are also potential tax benefits depending |
| strategy that provides flexibility and prevents an | | | | upon the circumstances of the lease. In some |
| overextension of credit. Construction equipment | | | | cases, the payments may be 100% tax |
| leasing should be a primary consideration when | | | | deductible (you should consult a tax advisor for |
| creating such a strategy. | | | | advice). A lease also provides a level of protection |
| Below, we'll explore the challenges that managers | | | | against obsolescence, though your business's |
| and business owners confront when they need to | | | | exposure to this factor will vary based upon your |
| replace heavy-duty assets. We'll also clarify the | | | | industry. |
| decision between construction equipment leasing | | | | Sources For Construction Equipment Leasing |
| agreements and purchasing such assets outright. | | | | Agreements |
| Challenges Of Replacing Heavy-Duty Assets | | | | Once you have decided that a construction |
| Because each vehicle or piece of machinery | | | | equipment leasing agreement is consistent with |
| represents such a large outlay of capital, fleet | | | | your company's capital expenditure strategy, you |
| mangers must approach the replacement of | | | | can work with a broker, independent leasing |
| those assets carefully. Technological obsolescence, | | | | company, or a "captive" lessor. A broker works |
| variances in market demand, and long-term | | | | directly with a number of financial institutions and |
| business objectives must be considered along with | | | | will present a tentative agreement to them on |
| budgetary constraints. Much depends upon the | | | | your behalf. An independent leasing company can |
| industry in which the assets are deployed. | | | | often provide better terms as they will work |
| For example, vehicles that are deployed in | | | | directly with you. A "captive" lessor typically |
| quarries in order to fulfill long-term excavation or | | | | operates as a subsidiary of a construction |
| extraction projects have a usable lifespan that is | | | | equipment manufacturer. |
| easy to calculate. As long as they are maintained | | | | Building Your Business Carefully |
| properly, the vehicles' capacity and the amount of | | | | When business is good, cash flow seems plentiful. |
| materials extracted from the quarry are the | | | | But, managers know that their companies are |
| most important considerations. By contrast, | | | | vulnerable to economic trends and changes in |
| projects that are focused upon building - or | | | | market demand. Quick decisions and the |
| rebuilding - infrastructure are far more susceptible | | | | reallocation of finite resources are often required |
| to market variables. | | | | to meet the challenges. If too much capital is tied |
| An effective capital expenditure strategy should | | | | up in heavy-duty assets, managers lose the |
| reflect the short and long-term needs of the | | | | benefit of liquidity. A construction equipment |
| business as dictated by market forces. Managers | | | | leasing arrangement can provide valuable flexibility, |
| should consider their heavy equipment finance | | | | giving them the room to maneuver within the |
| options given their budget limitations, forecast of | | | | competitive environment of their market. Such an |
| operational needs, and whether their resources | | | | arrangement can prove essential to growing your |
| can be allocated to better use elsewhere. | | | | own business while keeping your options open in |
| Benefits Of Construction Equipment Leasing | | | | the event new opportunities emerge. |
| As you might suspect, a construction equipment | | | | |