The Ultimate Guide to Heavy Equipment Leasing

Everything you need to know about leasing, including average heavy equipment leasing rates.

Heavy Equipment Leasing Guide

Leasing heavy equipment is becoming more popular than ever in the face of rising machinery prices and costly upgrades. It’s a great way to get virtually any type of heavy equipment on the market – from skid steers to feller bunchers – at a mere portion of its actual retail value. Following this guide will help make sure you receive the machinery you need with an affordable lease that allows you to recoup your expenses and reliably generate profit.

Various Types of Heavy Equipment
With the right lease, heavy equipment costs can be kept to a minimum while getting the job done!

What Are the Advantages of Heavy Equipment Leasing?

Leasing heavy equipment allows you to get the most technologically advanced equipment without having to pay the full cost upfront. In extremely competitive industries, (like construction), leasing lets you quickly assemble a modern fleet of commercial equipment without having to pay millions. It’s a way for small companies to get access to the same equipment as their larger competitors, and a way for large companies to save money by upgrading without having to purchase new equipment.

Fleets aside, heavy equipment leasing is also good for any situation where only a small amount of machinery is needed for a short period of time. Seasonal workers (crop farmers, for instance) often use short-term leases to obtain the equipment when they need it the most and then quickly pay the lease off during their busy months, saving much more in the process than if they were to buy the equipment outright. They also don’t have to worry about storage or maintenance for the rest of the year.

In fact, leasers have to worry about maintenance at all. It is the lender who is responsible for all repairs, which is especially good when the equipment depreciates quickly due to intense use (crushing plants, for example). That way, the equipment can be used to its fullest and repaired frequently without having to worry about reselling it later at a much lower price.

Finally, a recent explosion of new technology is rapidly changing heavy equipment across many industries. As high-tech farming and the latest construction trends turn to advanced machinery to offset high labor costs, a new wave of expensive equipment will soon be here. Agricultural and construction leasing offers a way to ease the projected costs of these new technologies while also letting companies try things out first before deciding to buy.

Construction Equipment Working at a Jobsite
A heavy equipment leasing contract can be ideal for small and large jobs alike.

What Types of Heavy Equipment Leases Are There?

There are four main types of leases to choose from, each with their own distinct advantages:

  • Fair Market Value

    At the end of the lease you can either buy the equipment, return it, or renew the lease and keep using it. This type of lease has the lowest monthly payments and the most flexibility, and is therefore the most popular when it comes to heavy equipment.

    If you decide on buying the equipment, the price is based on how much the equipment is currently worth compared to newer, better technology that has since come out.

    This is a strong option for startup-to-medium-sized companies.

  • Dollar Buyout

    This lease comes with higher payment installments than a fair market value lease, but you can buy the equipment at the end of the contract for just one dollar.

    Only use this on a piece of heavy equipment that you know you will need for a long time without becoming obsolete.

    This is a strong option for startup-to-medium-sized companies.

  • Wrap Lease

    This is where you add a new piece of heavy equipment to a lease that already exists, and then combine the payments together.

    Large businesses use wrap leases to quickly upgrade their fleets without having a huge amount of separate contracts to keep track of.

  • Sale Leaseback

    This is where you sell a piece of equipment that you already own to someone and then they immediately lease it back to you. Ideally, you quickly pay the lease off while using a portion of the profits from the initial sale to invest in more equipment.

    A typical sale leaseback takes about three to five years to pay off.

Farm Equipment and Farmer Calculating
You can buy heavy equipment at the end of your lease for as little as one dollar.

How Much Does it Cost to Lease Heavy Equipment on Average?

A good rule of thumb, when calculating average heavy equipment leasing rates, is to plan on spending about $40.00 and $60.00 per month for every $1,000.00 that the machinery is worth. So a machine that costs $10,000.00 to own will cost you about $400.00 to $600.00 to rent every month, and a machine that costs $1 million will cost about $40,000.00 to $60,000.00 per month.

Of course, your credit score, company history, and the length of your contract (which ultimately determines how much you pay in interest) will change these estimates accordingly.

Other Important Considerations

Here are some important factors to think about before leasing heavy equipment:

  • Monthly Budget – Leasing installments is always cheaper than purchasing equipment in installments. However, the leasing payments must be affordable and leave room for your business to grow.
  • Duration of Use – You may be better off financing equipment that you’ll need for longer than two years instead of just leasing. Otherwise, the interest may grow out of control.
  • Technology – If you are using equipment that will still be feasible after more than two years, then you may want to finance instead of lease.

Ready to Lease Heavy Equipment?

From agricultural operations to construction, lease options are available across all industries. Whether you need to properly lease a skid steer, tractor, backhoe, crane, harvester, or something entirely different, we have a list of reputable heavy equipment leasing companies who want to help your business thrive!

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About Kyler Richman
Kyler is a reporter and staff writer at My Little Salesman.
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