Snow and Ice Season Is Upon Us: To Buy or Lease New Machinery?

by New member JohnJanes on ‎09-09-2016 03:30 PM

C10514442.jpgWhile winter weather events likely won’t begin for another month or so, September is a good time to evaluate your current fleet of equipment and whether it will be able to fulfill your upcoming scope of work and contracts. As a vital part of community infrastructure, you are responsible for keeping the environments you serve safe and functioning throughout the harsh winter months. Equipment downtime is not an option.

 

Due to the nature of the work, it is common to switch out machines on a frequent basis (every one to three years) to maintain the newest, most reliable equipment. In which case, the decision to buy or lease often becomes a difficult one. In this blog, we highlight important considerations, as well as advantages and disadvantages of buying vs. leasing equipment for snow and ice removal contractors.

 

 First, it is important to consider the following factors in your decision-making process:

  • Your current financial situation. Do you have money for a down payment to buy?
  • Overall ownership costs versus leasing costs.
  • Length of your projects or contracts. How many hours or how many times will you use the machine?
  • Your exit strategy. After you are done with your equipment, do you want to sell it or turn it in after a lease?

Weigh the Advantages and Disadvantages of Buying vs. Leasing

 

Advantages of Buying:

  • Over the long term, buying is more economical. You aren’t paying the cost of a third party carrying the responsibility of the machine.
  • You can sell the machine at any point during your ownership.
  • Since you own it, you can make modifications to the equipment to enhance performance particular to your projects.
  • There are no usage or hourly limits on the machine.
  • Year-end bonus depreciation tax advantages.

Disadvantages of Buying:

  • Your monthly payments may be higher than monthly lease payments. You may have to make a significant down payment on the machine to get your monthly payments similar to those of a lease.
  • When you buy, you will have money tied up in a capital asset that’s not available for other operational needs.

Advantages of Leasing:

  • Lower monthly payments, and often a low or zero down payment.
  • Lower repair costs as the machine will always be under the factory warranty.
  • You can easily transition to a new machine every two to three years. You may also be able to enter one-year leases if you like to switch out equipment annually.
  • You will pay less sales tax, and the lease could be 100 percent tax deductible as a operational expense—which can reduce the net cost of the lease.
  • Lease payments are often less expensive than rental rates on similar equipment.

Disadvantages of Leasing:

  • At the end of the lease, you won’t own the machine. However, you can look into lease-to-own options.
  • The hours you are allowed to put on the machines are limited by the lease agreement.
  • If you damage the machine or cause excessive wear on the components, there could be an additional charge at the end of the lease.
  • If you want to break the lease, there is typically a charge associated.
  • Over time, you will pay more money than outright ownership, and you won’t gain equity in the machine.
  • You cannot take advantage of year-end tax depreciation.

As you can see, there are a lot of factors to consider before purchasing or leasing equipment. This is why it’s a good idea to take the time to evaluate all of your business needs for the winter season before acquiring new machines. To learn more, contact your local Cat® dealer or visit us online.

 

We’d like to hear about your experiences as a snow and ice removal contractor.  

  • How long have you been working in the snow and ice removal industry?
  • How often do you switch out machines and attachments?
  • What attachments do you prefer (ex: Bucket, blower, blade, push)?
  • When you do get new equipment, do you tend to buy or lease it? What factors lead you to your decision?
  • What are some of the advantages and/or disadvantages you have experienced with buying equipment?
  • What are some of the advantages and/or disadvantages you have experienced with leasing equipment?

Comments
by Tim Gibbons
on ‎09-28-2016 10:58 AM

Do you have trianing videos specific to snow operations? Specifically for the use of snow pusher boxes and snow Blades? 

It is a very different scenario to train even an experienced operator on the most productive use of loaders for snow removal...

by New member JohnJanes
on ‎09-30-2016 10:32 AM

Tim - My apologies, we do not have an operator training video for our snow attachments. However, if you send me a private message (see top right of online community webpage), I will identify the closest local Cat Dealer to provide some in-person training.  Additionally, we have a cold weather operations training video for our M Series Small Wheel Loader machines at: https://www.youtube.com/watch?v=8GGUVDRHF_s

by R_James22
on ‎10-05-2016 12:33 PM

disagree with the disadvantages. This is all about the way you structure the leases as to whether or not you are entitled to equity, and tax benefits. And over time, on their lease they, assuming go to a good financing company, will get lower rates than their bank will offer, so in turn will save money, and no prepayment penalties aren't always associated.

 

otherwise great article.

About the Author
  • I’m an Attachments Product Application & Sales Support Specialist for Caterpillar in North America. I have been with Caterpillar for five years including roles in the field as a dealer sales support representative and marketing support in the skid steer and small wheel loader product groups. I graduated from Iowa State University with degrees in Agricultural Business and Economics. Our goal is to provide a full portfolio of attachments for our customers to be more productive and versatile with their machines.
  • I am a Pre-Field Agriculture/Product Application Representative for Caterpillar. I recently graduated from North Carolina State University with a dual degree in Agriculture Business Management and Agriculture Science, concentrating in Leadership and Environmental Technologies. I focus primarily on the relationships between customers, dealers, and the product specialists for the Building Construction Products division. Growing up on a beef cattle farm, I have several years of machine operation experience and agricultural knowledge. Thomas Jefferson said it best in that, "Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness."
  • I’m a Compact Wheel Loader Product Application Specialist for Caterpillar in North America. I have 11 years of experience, including roles in the field as a dealer technical support representative, and as a distributor business model consultant.  I graduated from North Carolina State University with a Mechanical Engineering Degree, and wanted a job where I didn't have to sit in front of a computer all day.  This job allows me to get out and get my hands dirty, with the goal of providing solutions to customers’ machine needs.
  • I am a Marketing Communications Specialist for Caterpillar with over twelve years of experience marketing the Cat brand to customers in Latin and North America. My goal is to arm customers with the information needed to make well informed purchase decisions; to maximize the value of Cat machines by using an array of Cat Work Tool attachments; and to minimize the total cost of ownership by using Cat parts and Cat Dealer service.
  • I am an expert Operator and Application Specialist for Caterpillar concentrating on products used in the construction trades industry. I operate, evaluate and train on Cat machines and Work Tool Attachments worldwide. I have a Degree in Agricultural Engineering, Craftsman Certified and was named Apprentice of the Year 1981 at the University of East Anglia, UK.
  • I am the National Association Manager for Caterpillar and have responsibility for customer associations and partnerships in multiple industries for Caterpillar. I have 12 years of experience at Caterpillar, and have spent most of those years in the field with dealers and customers around North America. I have always had a passion for equipment and find myself fortunate to be able to work with dealers and customers almost every day.
  • I am a Product Application Specialist with 16 years of experience in the industry. As a Building Construction Products Global Trainer, I focus on training dealers and customers on machines, attachments and applications as it relates to the construction, agriculture and landscaping segments.
  • I have been with Caterpillar for more than eight years, working in various roles including a materials engineer, a filters product manager and my current position as a parts consultant. My job allows me the opportunity to work with Cat dealers and customers providing insight on how the use of quality filters and fluids results in better equipment performance and lower owning and operating costs.
  • I am a marketing and sales support professional for Caterpillar. In this role, I work with our marketing and customer service teams to support or dealers and customers, concentrating on our Small Wheel Loader, Skid Steer Loader, Mini Excavator and Dozer product groups. The exchange of ideas, information and opinions about equipment and how it’s used in various industries on forums such as this blog helps me fulfill my role at Caterpillar to the best of my ability.
  • I am the commercial/market consulting expert for all Caterpillar tires and rims with 14 years of experience. I provide guidance in the harsher work environments of mining and industrial/waste applications. Our goal is to turn our dealers and customers into knowledgeable and trusted resources with respect to tires and rims. Our group offers training, technical support and resources to develop a level of expertise within the Caterpillar value stream that is ordinarily reserved for tire companies and local tire service providers. Ultimately, we want to provide our customers with a total Cat solution from the ground up.
  • I am a Sales Support Manager for Cat Financial and have responsibility for ensuring that the right financial products are available to Cat customers who purchase, lease or rent to own. 8 of my 10 years with Caterpillar Financial have allowed customer and/or dealer interaction as part of my daily responsibilities including over 3.5 years as a Territory Manager. I take personal satisfaction in finding financial solutions that work for our customers and CAT dealers.
  • I’m a Telehandler Product Application Specialist for Caterpillar in North and South America. I have 13 years of experience, including roles in the field as a dealer service operations and technical support representative, and as a distributor business model consultant. My telehandler passion and focus is working with dealers and customers to maximize the versatility of the product through machine and operator training.
  • I am a Product and Application Specialist with over 35 years experience at Caterpillar. I focus on helping you to determine the best Cat machines, work tool attachments, and services for you to use in the building and general construction, landscaping, specialty trades, and agricultural industries.
  • I am a Senior Regional Insurance Marketing Manager with 16 years’ experience at Caterpillar Financial Insurance Services. I have the opportunity to work with 18 North American dealers providing risk management products and services that helps the Caterpillar Enterprise ( Caterpillar, Dealers and Customers) manage their business risk. Caterpillar Financial Insurance Services offers Extended Protection Plans for machines and engines, Physical Damage Insurance, Inventory Protection Plans, Dealer Property and Casualty, Risk Management, Marine Transit Insurance and Dealer Bonds.
  • Jeff Brown is a marketing professional for Caterpillar Skid Steer, Multi Terrain and Compact Track Loaders. Over Jeff's 12 years in the industry, he has visited with and studied the needs of customers across landscaping, construction, and agriculture segments. Delivering innovative solutions that solve customer's problems is Jeff's main focus.
  • I am a North American Product and Application Specialist for Caterpillar. In this role, I have had the opportunity to represent Caterpillar at various trade shows and train customers on new Small Wheel Loader content. I graduated from Purdue University in 2001 with a Mechanical Engineering degree and have spent the past 15 years with Caterpillar in various engineering roles. Growing up in the Mid-West, I have always loved the cold and the unique activities winter enables. Unfortunately, I had to give those up when I moved to North Carolina. I don't care what people say, you never get used to a hot climate.
  • I am a Filter and Fluid Marketing Consultant with over 14 years experience working at Caterpillar. My focus is to ensure customers understand the importance of using superior filtration and lubrication products in their equipment.
  • I am a Sales Support Manager with over nine years of experience in a variety of roles with Caterpillar Financial Services Corporation. Throughout my career, I have had the opportunity to gain experience in matching financial products and tailoring funding strategies to the specific needs of customers. This includes more than three years as a Territory Manager in Seattle partnered with N C Machinery, an authorized Cat dealer covering the states of Washington and Alaska.
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