Written by Michael Thompson

Heavy equipment leasing is similar to taking a test drive before the purchase of a family vehicle. "Leasing or renting should be seen as a forerunner to buying, since it gives a chance to test the construction equipment without the burden of large cost or long-term investments," advises Lucy Bartlett, an Ezine Articles expert author.

This is just one advantage of leasing heavy equipment over purchasing it outright. Leasing companies describe many other selling points: tax deductions through immediate write-offs. Balance sheet management. Customized solutions. Solid asset management. Improved cash flow. Easy upgrades.

Even while the national economy struggled during 2007, leasing increased by 2 percent, according to an article in Associated Construction Publications written by Dave Gilbert and Dan Feder. The co-chief executives of San Diego-based Five Point Capital wrote a neutral report on the industry.

A key benefit of heavy equipment leasing is the option of trading in anything from a bulldozer to a conveyor for the latest upgrades, Gilbert and Feder say. "This is ideal in the construction business, where there are frequent advancements made to equipment, requiring contractors to constantly update in order to stay competitive," the authors explain. They go on to say that experienced leasing companies usually can make arrangements to finance up to $100,000 worth of construction equipment, and sometimes more.

Heavy Equipment Leasing Options

A typical lease arrangement is for between two and five years, according to the Equipment Leasing and Finance Association. The association outlines the three most common types of heavy construction equipment leasing arrangements:

• Fair Market Value Lease. If company managers expect the equipment to depreciate sharply in value during the time of use, this is a recommended choice. The company may purchase the equipment at the end of the lease, continue the lease arrangement or return the equipment.
• Dollar Buyout Lease. Monthly payments are higher than in the Fair Market Value Lease, but the company may purchase the equipment when the agreement expires for a nominal $1. By reaching this point via lease instead of purchase, company managers have protection against unforeseen finance troubles.
• Commercial Lease. This is the recommended option for obtaining more than $100,000 worth of equipment. Banks often may ask for collateral, but an experienced leasing company sometimes can persuade the lender to waive the requirement.

The Equipment Leasing and Finance Association offers a basic method for construction companies to choose between buying and leasing. Company managers are encouraged to measure which option would cost less in the near future. Lower-cost leasing, up front, could help the enterprise win more competitive bids to promote growth. With that growth, the company then would be in a stronger position to make a permanent buy.

To get the best deal on a heavy equipment lease, take the time to get price quotes from multiple leasing companies. BuyerZone's free matching service can connect you to qualified lessors that have the equipment you need – try our free simple equipment leasing quote request today and see how easy it is.