Leasing vs. buying equipment

Discussion in 'Rental Equipment' started by TTM42, Dec 8, 2011.

  1. TTM42

    TTM42 LawnSite Member
    Posts: 205

    I have been thinking recently about leasing mowers instead of buying them, I have been wondering why spend $10000 or more on a depreciating investment that has a limited write off when you can lease a piece of equipment and have a new one every two years so you always have a warranty. I know you don't have ownership at the end but who wants a 10 yr old mower that won't be worth anything at the end of that time period anyway? Also, I was wondering if there were any tax write offs that you can get if you lease your equipment instead of buying it. Im sure that you guys here know the pros and cons of each so Im interested in hearing your response.
     
  2. GMLC

    GMLC LawnSite Platinum Member
    Posts: 4,353

    I have asked this question a couple times here and really got no answers. From what I understand some leases also include maintenance! I would think this is the best way to have a fleet for those that trade in their mowers every couple of years.
     
  3. Thanksman

    Thanksman LawnSite Platinum Member
    Posts: 4,695

    very good question..
     
  4. djagusch

    djagusch LawnSite Platinum Member
    from MN
    Posts: 4,226

    There are many different lease programs out there so one can not say if it is good or bad until the details are out.

    Here is my experience.

    Lease with ownership at end of lease. That says it all. I make payments over 34 months at the end the mower is mine.

    Pro's: Easy to get (took three minutes), don't need to worry about interest rate changes, get the mower at the end of the lease, and lease payment 100% wrote off.

    Con's: If you figure the rate of the lease it has about 10% interest rate (compare cost to write off), if you pay it off early you don't pay less (unlike a interest loan).

    Going to the bank for a loan. 2yr loan.

    Pro's: Lower interest rate (around 6%), build relationship with bank, if you pay more your costs of the loan go down (less interest), and you own the mower.

    Con's: More paperwork to get and a meeting (maybe 2 hrs of time), deprication tables etc can be confusing (I just let the accountant deal with it).
     
  5. djagusch

    djagusch LawnSite Platinum Member
    from MN
    Posts: 4,226

    The lease for 2 yrs and return programs I have not looked into. I would think they would work with high mower hour operations (if you put 1000hrs on a mower a year it could make sense).

    You would need to go over your numbers to figure out if the lease makes sense. I don't find my mowers breaking down much, so if the machine is solid I'm going to still run it.
     
  6. TTM42

    TTM42 LawnSite Member
    Posts: 205

    Thanks for the replies guys, keep them coming please
     
  7. twward

    twward LawnSite Member
    Posts: 51

    A true lease has a predetermined residual at end of the term. The benefit of a "true" lease is the monthly payment is considered a rent payment and is 100% expensed. Also, you get the "useful" life out of the piece of equipment. Do you really want to own an old, worn out mower that is just going to sit around once it is finally paid off? Or, would you rather have a consistent monthly payment so that you can have peace of mind about your equipment and also so that you can budget and plan future expenditures.

    The lease with a "dollar buy-out" and the lease that you own the equipment at the end is not a true lease. Alot of these types of leases are now outlawed in some states. With these two leases, you generally do not get the tax advantages.

    Having been involved with the financing and leasing of compact equipment, I can honestly say purchasing vs. leasing is something that you should talk about with your CPA.
     
  8. muddywater

    muddywater LawnSite Bronze Member
    Posts: 1,813

    I buy used and it pencils out better than anything.

    Just bought a 09 Turf Tiger 35 briggs with 190 hours. Paid $6500 delivered. I will use it for two years and put 1500hrs on it. I will sell it after two years for about $4500. It will cost me $83 a month.

    If you buy new new it will cost about $230 a month.
     
    Lawn Spa likes this.
  9. Duekster

    Duekster LawnSite Fanatic
    from DFW, TX
    Posts: 7,961

    If you want to take the section 179 tax deduction then buy. Leasing is helpful if your credit is not the best.

    I like the idea of new equipment but I see the point of saving cash for buying good used mowers.
     
  10. lazor-cut

    lazor-cut LawnSite Senior Member
    from Wixom
    Posts: 315

    We lease a few machines..this is our 2nd season doing it. We couldnt be more pleased with the program. We pay 4k for the machine and they do all the maintenance and repairs (oil,blades, belts, spindles, etc) on it. All we have to do is drop it off at the end of the season.
    "The first year you get a BRAND NEW machine then every other year from then on."- Says the contract.
    BUT For me, i have them tag my machines so i get them back year after year. This prevents me from getting someone else's such as Brickmans (Beat to death) mower.
    This way i know exactly what they have gone threw.

    We figure after 1000 hours the repairs begin and some of the major ones can be pretty expensive! Like $1500 for the part plus labor!!

    My Dealer is pretty cool too, last year my dealer was so busy and couldnt get me in so i decided to change my oil on the LEASED machine, They reimbursed me with 3 sets of mulching blades for my OWN machines.

    feel free to ask me questions.
     

Share This Page