Recently, we’ve been focusing on the benefits of portable and
modular plants for aggregate, sand, gravel, and recycled asphalt
processing. It’s true that portable equipment can be ideal in terms of long
term cost and production flexibility. Portables
can add capacity quickly so you can meet changing contract or seasonal
requirements, too.
And with the rise in portable equipment’s popularity, a new
way of procuring equipment is also growing—leasing—as opposed to traditional
financed buying.
Today’s post shines a light on equipment leasing, offering
you some insight on how it might benefit your operations, but also giving you
some potential tradeoffs to consider vs. buying.
Equipment Purchasing and Rental are Both Expanding Right Now
According to a Pit & Quarry article about equipment buying
trends at the end of 2018, equipment rental is catching on because
producers are concerned both about being able to meet rapidly changing industry
demands and keeping up with technological advances.
Sales are trending upward, too—the economy is strong, and
it’s a fantastic time to get into aggregate production!
Our perspective on the lease vs. buy question
While we still strongly support purchasing here at Kemper Equipment, we are
proud to offer equipment rental options to our qualified customers for new
custom systems and retrofits, too.
Like our industry peers discussed in that recent Pit &
Quarry article, leasing can allow equipment manufacturers and dealers to be
more agile and turn over assets quickly, which is helpful for innovation across
the industry. And for our customers, leasing can offer an affordable way to
“try before you buy” so you can really hone your operations to include just the
equipment you truly need.
All that said, it’s essential to remember that leasing is
different than buying, and there are some significant things to understand when
deciding if it’s right for you.
Things to understand about leasing
As with anything you lease or rent—passenger vehicles,
housing, extra storage space—the main point to remember is that you’re paying
only to use that asset, but it’s not
yours. You don’t own it. Maybe you’re not sure that you actually want to own it—and that’s probably the
whole reason you decided to lease in the first place—but using someone else’s
equipment comes with some important considerations.
Lease Agreement Terms
There are several different ways that lease agreements can
be structured, and you’ll need to understand precisely what you’re getting
into. For instance, capital
leases and operating leases are two of the most common types of contract
formats—only capital leases give you the option to own the equipment you’re
using at the end of the agreement term.
Financing vs. Purchasing
It’s well known that even if you’re presented with the
option to buy the equipment you’re leasing for a price below fair market value
at the end of the term, your payments will likely be higher than if you
financed a purchase of that same equipment. Depending on factors such as the
equipment’s predicted ability to hold its value and perhaps even your personal
creditworthiness, your payments may be significantly inflated versus
purchasing. And it’s true that many equipment manufacturers now offer
finanacing as an incentive to try their brand.
It’s always a good idea to compare various payment scenarios
before you sign anything. Look to buy
vs. lease calculators online that can help you weigh your options on things
like your monthly payments and current loan interest rates to see if renting or
buying a particular piece of equipment will be the better financial decision.
Consider Downtime
It’s true that you likely will not be responsible for fixing
or paying for repairs to leased equipment when breakdowns occur—your lessor
will take care of this as the equipment’s true owner. While this may seem like
a big check in the “pros” column for leasing over buying, you need to be
careful who you’re leasing your
equipment from to actually have this be a benefit instead of a major liability
to your operational efficiency. How so? In short—downtime.
Often, if the equipment owner is paying for repairs, they’re
also selecting who will make those repairs, and you can guarantee that they
will prioritize cost savings above all else in choosing that service. You may
not be in control of who comes out to fix your equipment, and you’ll certainly
not be in control of how long it takes them or whether the work is done right
the first time.
As we’ve discussed in previous posts here on the blog, downtime
can cause big problems with productivity, which can lead to customer
dissatisfaction, and ultimately, to lost business.
Whether buying or leasing, you need to work with a reputable equipment
dealer
You should indeed be wary of the downtime factor, and if you
pursue either an equipment purchase or lease from a supplier with deep
integrity and experience in the industry instead of a third-party lessor, you’ll
cut that risk significantly.
You’ll also be gaining a knowledgeable partner committed to
helping you achieve your production goals through a variety of tried and true solutions—from
equipment service and maintenance to education and training opportunities we
can offer your team. And, in fact, we can help you weigh whether leasing or
purchasing equipment will be better for your bottom line from the very start.
Here at Kemper Equipment, we work to support your operations
and genuinely care about your success. But that’s not all. We’re also committed
to providing high quality at a low cost. If you’re currently researching
leasing options for portable equipment—or even
for fixed plants—bring us your budget details, and we’ll show you how to save,
both in the short term and well into the future.
Get in
contact with the pros at Kemper Equipment for all of your material handling
equipment purchasing—and leasing—needs.
