It’s that time of year again, where you evaluate if you need to add to your snow pushing fleet. And the options continue to be buying or leasing commercial snow equipment.
In this article, you’ll discover the following:
- The secrets for owning and leasing commercial snow equipment
- Evaluating if your budget can handle a lease or a purchase
- The return on investment (ROI) of buying equipment
- How to get financing for your lease or purchase.
The Secrets for Owning and Leasing Commercial Snow Equipment
Turf magazine had a thorough article describing the ways to finance new snow equipment. For example, the author recommended that you talk to your CPA and not your dealer before you make any final decisions on adding more equipment to your fleet.
Your CPA acts as your business advisor—they have your best interest in mind, and they know your revenue threshold. Your CPA should consider the following:
- Do you have cash on hand? Do you have enough revenue coming into your company to pay vendors, employees, and any quarterly taxes?
- Snow equipment, like cars and trucks, depreciate as soon as you get them off the dealership.
- Current tax law to see if you’re eligible for a tax benefit by leasing this new equipment.
- Financial rates—how high or low the interest rates are for leasing, renting, or buying new snow equipment.
Your CPA will evaluate all of the above and ask you questions on how much money you plan to make in the New Year, and if you’ll get an ROI on your investment.
Keep in mind, your CPA may discourage you from buying, leasing, or renting any equipment this winter. If your snow equipment is on its last legs, you may need to see what all your financing options are. Your CPA can help you work through the money side of things.
Ask your CPA if it makes sense for you to sign a lease if the equipment is still in good shape at the end of the loan period, where you’ll buy the equipment outright.
You can also get a dollar buyout lease where you pay $1 at the end of the lease. This type of contract is the same as buying equipment with a loan.
There are certain tax advantages to a dollar buyout lease. Again, check in with your CPA to see what they recommend.
Other things you can discuss with your CPA regarding your company’s financials include:
- Do you have cash on hand?
- What’s the depreciation of the equipment?
- Section 179 of the tax law may benefit your bottom line.
Section 179 of the tax law says that, depending on the lease’s structure, you’ll own the leased snow equipment at the end of the contract.
Small to medium-size snow and ice removal businesses benefit because you take the full cost of that equipment against your income the year that you bought and used that machine. If your snow and ice management company is profitable, your tax benefit will help you.
Again, your CPA can give you the best advice on tax law and leasing commercial snow equipment.
6 Other Factors to Consider
If your snow-moving equipment is older and well-used, it may be time to get a lease or buy outright commercial snow equipment. Today’s property managers and HOA boards have zero-tolerance if your equipment breaks down when you’re supposed to be out clearing parking lots and roads.
If you can’t follow through on your customer’s snow contracts due to faulty equipment, you’ll earn a bad reputation for being unreliable—not a good thing when competition is steep. Here are six tips that Turf magazine recommends:
- Look into the tax advantages you receive from buying or leasing your equipment
- How’s your cash flow? Do you have money in the bank to buy outright or do you have enough for a down payment on a loan? You don’t need a lot of cash on hand when you lease your snow equipment.
When you decide to buy rather than lease, you’re assuming responsibility for all the fleet’s maintenance and repair needs.
- The total cost of ownership – as you know, you need to pay for maintenance and upkeep of your snow equipment. Can you afford it?
Typically, leases and loans have low monthly payments, so you have some extra cash on hand. You don’t have that option when you purchase commercial equipment. On the other hand, you won’t be investing in your machine when you lease it rather than buying it.
Conversely, a lease limits how many hours you can use the commercial equipment over the winter. Once you reach those 1,000 hours, for example, you can’t use that machine anymore, or you’ll default on your lease.
When you own the machines, you can use them as much as you need to. So, if a freak snowstorm hits your area—you can work. The company that used up all of its hours on the leased equipment is out of luck.
Contractors typically buy their own attachments and lease the big machines—especially if the amount of hours matches with how much the contractor will be using these commercial parts.
- Investigate how much repairs will cost you and can you do them in-house? Contractors who have diesel mechanics on-site can extend the life of their machines by a decade.
Some companies will buy equipment based on how much it’ll be used in the green season and then extend it to the white season. You can stretch out that time when you have a dedicated space for repairs in-house.
- How much will you be using this piece of equipment? Will you lease skid-steers or Autowings? Will you be able to use them in your landscape contractor company?
- Do you want the equipment because of its new features? Will these features help you get your job done quickly and efficiently? Will you get a return on investment with it?
Working with a Dependable Dealer
What type of dealer do you want to work with—a snake oil salesperson or a dealer who cares about your business? Hopefully, you picked the latter. Your dealer can help you decide if purchasing new equipment or leasing it is a better use of your cash.
Here are two values to look for in a dependable dealer:
- Your dealer will still be there when it’s time to service your equipment.
- Your dealer asks you questions during the sales process. He cares about matching the right equipment with the right company.
Your dealer will ask you how you’ll use the machines, and he’ll encourage you to buy or lease it. He’ll guide you to the right approach based on what makes sense for your unique commercial snow equipment needs.
Financing Through Your Dealer
You may have a lender you like and trust. But you might find a sweet leasing deal or purchasing option when you finance your machines through your dealer.
Long-term loans you get from your dealer work like small business loans. They vary from lender to lender but tend to have long maturation periods.
Manufacturers offer industry-specific financing through your local dealer as well. You can make that decision, usually, at the time of purchase—to lease the equipment or buy it outright.
At SnowWolf, we offer financing that allows you to loan or buy the snowplows and other snow attachments that you need to clear roads and parking lots. We make getting a line of credit with us super-easy:
- Our loan program is lightning fast and fair: You get our decision in minutes.
- Our loan program is easy with expedited funds: If approved, you’ll be able to draw funds at any time.
- You’ll receive straight-forward savings: Pay back your line of credit within three to six months. You only pay when you draw from your loan.
To learn more about our financing options, call our customer service at 1-800-905-2265, or fill out our contact form. If you’re ready to buy or lease SnowWolf snowplows and snow attachments, see our dealership page.