Leasing Can Minimize Your Upfront Costs and Offer Surprising Flexibility
Dump trucks and dump trailers are expensive. Even used dump trucks can set you back over $100,000—easily making cash purchase difficult for most owner-operators. You need the dump truck to get the contracts to pay for the truck.
The good news? There are more financing options than you might think.
Traditional bank loans are not the only way to finance new and used equipment. This article will lay out 7 ways leasing can change the financing game.
1. Reduce upfront costs
Cash is not limitless. Covering your day-to-day costs is hard enough. Let alone also paying for a 6 figure dump truck.
Too many out-of-pocket costs at the start of a loan can make the purchase unaffordable– even if the monthly payments are within budget.
A bank loan will require you to pay out-of-pocket for things like down payment, taxes, and inspection/transport costs before you get access to the equipment. Down payments typically run between 10% and 25% the cost of the truck in a bank loan. Keep in mind this cash is spent regardless of how long you use the equipment or whether it is performing well.
A dump truck lease will generally have no down payment or a smaller down payment. Taxes, transport and inspection fees can be rolled into your monthly payments. You also have the option to trade-up or trade-in if the equipment is not performing as hoped.
When you need the truck to pay for the truck (and a living for you), leasing gives you the leverage to win contracts and keep your cash.
2. Take advantage of flexible payment plans
Not all dump trucks will be working all year.
For most of us here in the Great White North, construction hauling work is a bit seasonal with busy times and slower times of the year. Bank loans like to operate on a 12-month payment cycle– meaning you pay out on it regardless of whether your truck is working or sitting on the lot. A good lease can be structured to allow for those seasonal downtimes. If you’re not going to be using the dump truck from November-March, why be paying for it? When you are setting up your lease, you should have the option to arrange for seasonal payments.
3. Afford better equipment
Leasing can enable your business to afford the best equipment for the job.
When you’re considering equipment costs, be sure to factor in efficiency, labour costs, maintenance costs and resale value. Cheaper equipment often saves in the short term at the expense of the long term.
To find the most efficient truck for your application, ask yourself the following:
- What do you expect to be hauling?
- How long do you expect to keep the truck?
- How many miles on or off road do you expect to travel?
- How fast do you need to go on the highway?
- How far do you expect to go between pickups?
A clear understanding of what specs and features will be most valuable to your business allows you to optimize your budget. Save money, time and hassle by purchasing the ideal dump truck for your application, not just the one that barely “gets the job done”.
4. Maintain a healthy debt load
Getting a loan will take a chunk out of your available credit. Dump trucks are costly, and it’s possible your credit limit won’t even cover the necessary funding.
Leases, on the other hand, are treated like a rental agreement– even if you lease to own. This accounting difference means that, in most cases, a lease does not add to your debt load. Meaning you have credit or cash available should you need it later.
5. Budget with confidence
Lease payments are fixed and won’t change over time. Market volatility and interest rate hikes don’t affect lease payments. You can plan ahead and budget around a stable cost.
6. Stay Flexible
Many factors can necessitate equipment changes for your business.
New technology, changing markets, increases or decreases in fuel prices, new regulations, business growth; any one of these can necessitate a pivot if you’re going to stay competitive. The SPIF debacle in Ontario over the last couple years is a good example of how quickly the game can change.
Leased equipment can often be traded-in or traded-up in a pinch. Granting you a little more flexibility for the future.
7. Save on your business taxes
Lease payments can be entirely written off on your income or corporate taxes.
Unlike loans which only allow you to write off the interest from your monthly payments, your lease payment is entirely tax deductible. This savings is a result of CRA (Canada Revenue Agency) categorizing lease payments as a business expense and not a capital investment. Even in a lease to own situation your monthly payments are a tax write-off. Leases also provide regular ITCs on your sales tax filings.
Ready to find out if leasing is right for your next dump truck purchase?
If you’ve got questions, we’ve got answers. Thomcat Leasing has been working with small businesses and owner-operators like you since 1989. We know the dump truck industry and we know financing. Get the information you need to make the best choice for your business. Give us a call today or take advantage of our quick and easy 60 Second Lease Estimator. We look forward to working with you!
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