Leasing vs. Financing Heavy Construction Equipment
Leasing can be considered similar to equipment rental. In this, you would have to pay a fixed amount of money to guarantee the right to use the equipment. Once the lease term is finished, you can either purchase the equipment or return it.
The price of the purchase will depend on the type of lease you have chosen. Unless you purchase the equipment at the end of the term, you cannot become its owner.
Under certain types of leases, the equipment does not feature on your balance sheet. On the other hand, a loan definitely makes you the owner, and the equipment will be included in your balance sheet. Once you pay monthly rates, you become the owner of the equipment at the end of the term.
Leases are usually used for equipment that gets outdated rather quickly, and when the business owner is certain that the equipment will require upgrading towards the end of the lease term. Note that heavy-duty construction equipment could last long periods of time, and hence a loan is the recommended method of financing in such cases.