Your Guide to Heavy Equipment Leasing [Video]

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Leasing equipment is a great way to get the tools you need, now. 
Can't afford the expensive upfront price tag or longterm commitment required with owning heavy equipment? Leasing the heavy equipment you need is great way to not only obtain virtually any type of heavy equipment on the market—from skid steers to feller bunchers—at a fraction its actual retail value for the duration you need it. This guide will help you navigate the heavy equipment leasing process—allowing 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 the competitive industries that require heavy equipment to land necessary jobs (such as construction and agriculture), leasing lets you quickly assemble the commercial equipment you need without having to front millions of dollars or take on exorbitant debt in order to land the job. If you're a smaller business looking to expand, leasing your heavy equipment helps you gain access to the same equipment as larger competitors. If you're a larger company, you can save money by upgrading equipment via a lease agreement without taking the same responsibilities that coincide equipment ownership.

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—such as crop farmers—often use short-term leases to obtain the seasonally-necessary equipment—allowing them to avoid buying equipment they only use during certain parts of the year. 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, access to advanced equipment has grown to be a significant tactical advantage. 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 exist?

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

Fair Market Value

With a Fair Market Value (FMV) heavy equipment lease, at the end of the lease, the leasee can either buy the equipment at a "fair market value," return it, or renew the lease to extend its term. FMV heavy equipment leases have the lowest monthly payments and the most flexibility—making FMVs the most common when it comes to heavy equipment leases. 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 popular option for startup-to-medium-sized companies.

Dollar Buyout

Acting more as financing plans than leases, a dollar buyout (or "one dollar buyout) heavy equipment lease allow leasees to lease heavy equipment for such a rate in which they are able to buy the equipment one dollar. Dollar buyout leases are best for those who plan to purchase the equipment at the end of the lease. As before stated, these leases are primarily used as a means of buying equipment without taking ownership until the conclusion of the lease term. 

Wrap Lease

A heavy equipment wrap lease consists of adding new heavy equipment to a pre-existing lease and combining the lease payments. Large businesses use wrap leases to quickly upgrade fleet equipment without the need to account for separate contracts.

Sale Leaseback

A sale leaseback consists of selling existing heavy equipment to an investor and lease it back for a specific term. 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.

What is the average cost of a heavy equipment lease?

When calculating average heavy equipment leasing rates, the average company should plan on spending about $40.00 and $60.00 per month for every $1,000.00 that the machinery is worth. For example, a machine that costs $10,000.00 to own will cost a company about $400.00 to $600.00 to rent every month. A machine that costs $1 million will cost about $40,000.00 to $60,000.00 per month to lease.

These rates are subject to change due to a company's credit score, history, and lease term length contract.

Other Important Heavy Equipment Lease Considerations

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

Monthly Budget
Leasing installments are typically cheaper than purchasing equipment in installments. However, the leasing payments must remain financially sustainable for a growing company.

Duration of Use and Technology
Though leasing heavy equipment that is infrequently used or is subject to quickly being technologically obsolete, many companies are better off buying equipment that will need to be used for an extended period is better off purchased with affordable financing. This is due to the expensive longterm interest rates inherent in leasing. 

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, you're invited to search our list of reputable heavy equipment leasing companies who want to help your business thrive

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About Ken Lane
Ken’s affinity for the heavy equipment industry was fostered as a curious youngster—becoming happily lost on his grandfather’s tractor sales and service lot (his favorite color is still Allis-Chalmers Orange). Since then, he’s perfected the art of turning black coffee into helpful buyer resources and marketing materials for My Little Salesman.
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