Equipment Lease Purchase Arrangements Helps Contractors

By Essie Craft

The cost of equipment can be very expensive and some companies might have trouble obtaining the type of machinery they need to use on a regular basis. Lending institutions have come up with several different ways on how a business owner can afford the apparatus they need to function. Among the financial products that are available are equipment lease purchase agreements that allow a company to obtain machinery at a lower cost and receive some of the same benefits of ownership.

The lower monthly payment means that a company might be able to afford apparatus that would otherwise be too expensive to obtain. A new company doing construction might have a difficult time maintaining a cash flow to purchase a large excavator to dig foundations for buildings, but they might produce enough income to manage a rental arrangement. An excavator dealer may be able to allow a contractor to use their equipment for a limited time and then the dealers can sell it when the contractor turns the excavator back in after the rental term has expired.

There are basically two types of leasing agreements a company can enter into. One is a where the company will retain ownership of the vehicle after the agreement has come to an end. The other is an operating arrangement where a company will use the apparatus over the term of the arrangement, but does not automatically retain ownership at the end the rental term.

The capital and the operating arrangements both allow for the total financing of the apparatus without having to put down a twenty percent down payment. This helps a small company keep cash on hand to pay employees and overhead. Monthly payments are often affordable and help a company retain more of their monthly earnings to keep on operating.

Another benefit is having access to updated machinery. Technological advances can improve a lot of things. Construction supplies in an area where the advances can make the jobs easier to perform as new machine models enter the marketplace.

The contracting company can realize the same kind of tax benefits that are available to those who buy machines. They can often write off the monthly payments to lower their tax liability in a lot of places. A contractor might be able to hold on to more of his earnings every year and not give the money to the government.

The option to buy is also an attractive benefit for some companies. At the end of the arrangement a company may be able to purchase the vehicles at a reduced cost since the vehicle has already depreciated in value. This price could be affordable for tools the contractor wants to keep.

Contractors can have several options when trying to get new apparatus. They can buy it straight from the dealer and own the machine. The other option is enter into an equipment lease purchase agreement that can have some of the benefits of ownership without actually owning the machine.

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