Compare Buying vs. Leasing a Bulldozer
Thanks to its broad range of uses, a bulldozer is a vital piece of heavy equipment on many jobsites. Construction companies, landscapers, farmers, and more use these machines every day. Whether you're purchasing your first bulldozer or need to replace an old one, your first decision is whether to lease or buy. Each option has its own list of pros and cons. Only you can decide which option is the best for your business. To help you make your decision, we offer the following.
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The Benefits of Buying
If you have either the cash flow or the credit to afford buying a bulldozer, ownership represents significant savings over time. This is because when you buy any piece of equipment, you pay substantially less than you do when leasing that same piece of equipment. If your business relies on a bulldozer for its profitability, this is especially true.
There are other financial benefits to ownership. For example, you typically qualify for tax credits, such as depreciation and interest (if you finance the purchase). One popular deduction is under Section 179, part of the Protecting Americans from Tax Hikes Act of 2015. Talk to your accountant to discover the possible tax savings in ownership.
Another financial plus is that you build equity and your business's assets and gain the ability to sell the machine at a later date. Many dealers offer discounts to repeat customers.
Ownership also gives you total control over your equipment. Maintenance and repairs are your responsibility. To some, this counts as a downside, but to many, the autonomy of ownership – control over its use, final decision in its care – belongs solidly in the "pro" column.
If you do choose to buy, check the warranty and maintenance coverage carefully. Purchase price typically includes some sort of maintenance package. If it doesn't, you need to budget for preventive maintenance and replacement parts in order to protect your investment. If it does include a service package, it should cover you for three years or 3,600 operation hours (fairly standard for heavy equipment warranties). If you choose a used machine over a new model, still ask about a warranty. It isn't a given, but some dealers include them. No matter what, have a used bulldozer inspected by a qualified mechanic before purchasing.
The Benefits of Leasing
If you don't have the cash flow or credit to buy, leasing is a viable option. What's more, if your business is not yet profitable, you may not be able to take full advantage of the depreciation credit on your taxes.
Leasing brings with it a variety of benefits. First, of course, is that you save both your cash on hand and credit. However, even established businesses often choose to lease their equipment. Leasing lets you upgrade to the newest, most technologically advanced models every few years. Not only do you get the most up-to-date equipment, you also tend to reduce downtime due to repairs.
One pro many business owners appreciate is the reliability of regular, monthly lease payments. Leasing also carries potential tax benefits, as lease payments are often eligible business expenses. If you choose a capital lease, you may even be able to claim depreciation. As always, check with your accountant to be sure. The two most common leasing choices are operating and capital. With an operating lease, you return the bulldozer at the end of the contract. Capital lease contracts usually include a purchase option. With both options, expect the contract to last for at least one year, with larger and more expensive models typically requiring a longer lease.
As with purchasing equipment outright, your leasing agent may offer discounts if you lease multiple machines. Don't be afraid to ask for these discounts. Check also to see what type of maintenance package your lease includes. Some cover all replacement parts, maintenance, and repairs, while others cover only preventive maintenance. Review the lease carefully before signing.
Disadvantages to Both
The main disadvantage of both options is financial. With purchasing, you're looking at a substantial investment, especially if you buy new. Even a small bulldozer costs $30,000 to $40,000, and that's without adding any attachments or special features. As the machines get larger and you add accessories and features, you can easily spend 10 and even 20 times that amount. Add in maintenance costs and the price of ownership is substantial.
However, though leasing is a much smaller initial bite, over time you pay around 25 percent more for a leased unit than one you buy outright.
In the end, the best option is whichever works better for your business. If you have substantial working capital and regular need of a bulldozer, buying is probably your best bet. If your resources are limited or you're in a growth phase, you probably want to lease.