A contractor who needs equipment faces a three-headed monster-whether to buy, lease, or rent it. A wrong decision can cost thousands of dollars. Unfortunately, there's no formula; each situation is unique. There are many advantages in owning equipment. The operation can sell or lease its equipment as it pleases. In addition, contractors can use or abuse their assets as they please. What's more, wholly owned assets can be collateral for bank loans. Buying equipment also has potential tax benefits. The owner can either take a one-time tax write-off equal to the purchase price, or depreciate it over a time span assigned by the IRS. Interest on money borrowed for equipment purchases is also deductible, as is cash spent on an asset's repairs, maintenance, and operation.
New or Used?
If you do decide to buy, there's a further consideration -- whether to purchase new or used machinery. With new equipment, you have greater assurance of reliability and optimum performance. Novice contractors, however, often can't afford new equipment. If you do chose to purchase used equipment, remember that other masonry contractors, particularly those going out of business, are a good source of used equipment.
Bank Loan or Lease?
Even at competitive prices, buying is not always the answer. Leasing, especially for large equipment, can make more sense than buying. A potential advantage of leasing is that lease payments can appear on the income statement as business expenses, not on the balance sheet as debt. That means a company has greater access to additional capital because its equity isn't tied up in depreciating assets. Both leasing and owning are logical options for equipment needs lasting at least a year. Renting, however, can be ideal for short-term needs.