Across the country, professional landscaping contractors are well into the mowing season, however, it’s never too early to start evaluating your fleet and planning your next machine purchase.
As landscapers begin to evaluate machine options, they will rely on dealers to help them navigate the process of selecting and purchasing equipment. As a dedicated partner of landscaping contractors, it is crucial for dealerships to advise customers when making decisions that will have a financial impact on their business. This is especially true when it comes to determining whether to rent or buy equipment.
How you pay for it is just as important as what machine you buy. Choosing the right type of financing when purchasing new equipment has a direct impact on your business.
Do you feel overwhelmed by the different options?
We’ll go through each purchasing method and the benefits, helping to streamline the process for you.
Decide how to pay for your equipment
When purchasing a new machine, there are several options to help maintain cash flow over time. First, you need to decide if you want to pay off the machine all at once, or if you prefer to spread the payments over time using a lease or installment loan. While financing is the preferred method, it is important to determine the right type of financing based on the unique needs of your business.
There are three main types of financing: leasing, installment loans or revolving loans. Each type of financing has its own advantages, but all three provide an opportunity to generate income while paying off the balance.
Constituted as a long-term contract, an operating lease fixes a fixed payment over a predetermined period, often two to three years. At the end of the term, you have the option of purchasing the machine or returning it to the dealer. One advantage of an operating lease is that it can offer lower payments compared to other types of financing, which improves your cash flow throughout the year.
Another advantage is that it allows you to run the machines every two to three years, ensuring that your fleet has new equipment. This can help reduce the risk of potential downtime, minimize exposure to maintenance expenses, and keep you with the latest innovations and technologies available.
Another benefit of leasing is the ability to deduct 100% of your rental payment as an expense, which reduces assets and liabilities because you don’t own the equipment. Leasing also preserves bank lines of credit for other business purposes. In addition, your dealer may be able to match the term of the lease with a warranty period. This will ensure that the machine is under warranty for the duration of the lease.
How will the equipment be used?
It is important to consider how the equipment will be used before deciding to rent. Rental terms often limit hours and require the machine not to be damaged on return, which can be a problem during operation. However, for specific snow and ice equipment, the machine will only be used seasonally, so time restrictions are not always an issue. When considering an operating lease, you should discuss with your dealer how you plan to use the equipment to determine if it is the right solution for you.
While installment credit also allows payments to be spread over time, unlike term leasing, the customer owns the equipment. This means there is no limit on hours and damage is not an issue, making it ideal for a customer who might be spending a lot of hours on a machine. If you decide to take out a loan, check with your dealer or lender for any special financing offers. Sometimes financial institutions offer incentives like zero percent interest for a specific period of time, which can help save you money in the long run.
A revolving loan, or revolving account, is another financing option. This option is mainly used for small purchases, but should always be considered for your business. A revolving loan is essentially a credit account, allowing you to add parts, accessories, tools, and other small fees, which will be paid off monthly. Financial institutions can also offer incentives on these types of accounts. If you are managing multiple teams, this is ideal as multiple people can go to a dealership to get parts and other items as needed.
Work closely with your dealer
It is important to work with your dealer to discuss your equipment needs. If you are purchasing equipment like a compact utility tractor or front mower, attachments and tools will allow you to use the equipment during the summer months and can be part of the overall machine financing.
When speaking with your dealership or lender, it’s important to have answers to a few critical questions that will help you determine the right type of financing for your business:
1. How long will I be using this equipment?
2. Do I want to own the machine or use it at the lowest overall cost?
3. Am I interested in keeping up to date with the latest technology?
4. Is there a current financial advantage for us to rent over owning?
Discuss your answers with your dealer or lender to help you determine what type of financing is best for you.
Some manufacturers also offer financing, such as John Deere Financial, helping to streamline the process. These manufacturers are in touch with your dealership, know your business needs well, and offer personalized finance such as seasonal payments, rental damage waivers, and discount hours to help you maximize your cash flow. With financing, there are often many options available depending on your business, so an expert can help you find the best fit for you.
Consider other options as well, including accessories, tools, maintenance, and parts. Many customers don’t realize that additional options can be built into a finance package, giving you all the tools you need to run your business with just one monthly payment. The financing formulas will allow you to improve your cash flow and simplify your operating costs.
Make a wise choice
Buying or leasing equipment can seem overwhelming, especially when trying to determine a financing strategy that will have a positive impact on your business. Work with an expert, like your equipment dealer, who understands the pros and cons of each financing option, and your business, to help you make the right decision. Your dealership is committed to your business and strives to help you succeed. By understanding your options and your business needs, you’ll have new equipment and be up and running in no time.