This blog post was written exclusively for ForConstructionPros by equipment leasing company Balboa Capital.
When it comes to leasing or buying construction equipment, there is no right or wrong choice. Every business is unique and has its own way of running its operation. One strategy that proves successful for one construction company may not yield the same results for another. Take into account various factor such as your budget, the cost of the equipment and how long it will be used to determine if you should lease or buy.
Leasing enables you to get your construction equipment for a fixed monthly payment over a specific time frame, say 24 to 48 months. This can mean obtaining the needed equipment without breaking the bank and maintaining a healthy bottom line by not spending more than what's necessary.
Key benefits of construction equipment leasing
- Allows for 100 percent financing
- Prevents equipment obsolescence
- Flexibility for equipment upgrade
- Preserves cash flow and credit lines
- Easy application and approval
- Tax advantages
You can choose the lease term that best fits your budget and your equipment needs. When your lease is up, you have the option of returning the equipment, buying it outright or extending your finance program.
Construction business owners and contractors should also note that the advantages of leasing are not limited to heavy equipment alone. A wide variety of other items and property can be leased including computers, software, office printers, office furniture and business vehicles.
Section 179 tax deduction
Many construction business owners are not aware that the IRS’ Section 179 Tax Deduction applies to equipment leasing. From now through December 31, 2012, you can deduct up to $139,000 worth of qualifying leased equipment. This is something to seriously consider, as the deduction limit is scheduled to take a significant drop to $25,000 in 2013. Many construction business owners have leased equipment this year knowing they will not have the same business tax write-off opportunities in 2013.
If you want to learn more about Section 179, the IRS website has a multitude of information and a list of qualifying equipment. You should also consult with your business accountant to make sure that your construction equipment is eligible for this generous tax deduction.