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Leasing Equipment

Discussion in 'Business Fundamentals' started by cold_and_tired, Feb 14, 2011.

  1. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,246

    So Caterpillar has a new program going in right now that would allow me to lease equipment for $25 per machine hour with a minimum of 400 hours per year. Every cent that I pay Cat during that year would go back as down payment if I were to purchase the machine.

    Seems like a good deal to me since I paid over 14k in skid rental last year and have nothing to show for it. This program would cost me at least 10k but I can put that money back as a down payment.

    Here's my problem. My business is tilted heavily towards snow plowing/removal. I have multiple commercial accounts and make good money with them. I typically rent two skids per storm and occasionally have to add a backhoe or loader to the arsenal. During the summer, I am a fence builder/light landscaper. I could certainly use a skid during the summer and keep it semi-busy. Obviously, I have no need for two skids and a backhoe/loader.

    Over the past storm, one of the rented skids got 54 hours put on it and the other had 46. It was a heavy storm for this time of year.

    We are halfway through our season but have our snowiest months ahead of us. Should I put off leasing the skid until this summer in hopes of making up hours on it next winter or should I pull the trigger now, use it the rest of this winter and do my best to keep it busy this summer and the beginning of next winter?

    As you can see, I am at a stepping stone here and not sure when I can make the leap. Doing some number crunching and analysis, I'm 99% confident that I could meet the 400 hr per year minimum.

    I desperately want a skid that I can call my own but I need some clear, unbiased thoughts on this one. It's a want/need situation.
  2. Mdwstsnow512

    Mdwstsnow512 Senior Member
    Messages: 168

    get a loan and go buy a 15000 machine, the cost of all the equipment is way to much for you.

    are they doing this for all equipment or just skids?

  3. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,246

    I would buy one but my credit score got knocked in the dirt a few months ago. We had an unexpected illness in the family that soaked up most of my money. I'm viewing this as a way to re-establish my credit as well as save money on the rental stuff.

    I think they are only doing this on the skids but they just came out with some awesome lease numbers on all of their equipment.
  4. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Don't Cat have a deal where you pay a lower summer rate and a higher winter rate?
  5. IMAGE

    IMAGE Sponsor
    Messages: 1,736

    They've been doin a similar program here for years.
  6. cold_and_tired

    cold_and_tired PlowSite.com Addict
    Messages: 1,246

    Anyone else have any input on my situation?
  7. M&M

    M&M Senior Member
    Messages: 312

    Can you rent your machines from a local contractor who does NOT use them during the winter? Your machine costs seem high to me as well but you are putting them to work so you might not see/care it's so high. My philosophy is a used machine for 1/2 price can do the exact same thing as a new machine for full price. You want a new machine...You NEED a used machine or 2.
  8. blowerman

    blowerman PlowSite.com Addict
    Messages: 1,261

    You will still need some kind of credit for leasing. A little easier because if you miss a payment they can come pick it up. Remember, they own it not you. Leasing is similar to renting only the payment are spread out over a longer period of time.
    If you have the work, rent a used machine from a dealer and then convert it to a purchase.
    I've taken machines and attachments on rent with bigger payments and in the end bought the equipment for a small buyout price.
  9. BlackIrish

    BlackIrish Senior Member
    Messages: 888

    I'm a big fan of lease to own. Low buyout at end of lease.