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.
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.