Cash, Lease or Finance – Options to Purchase Your Rental Fleet
by Clay Price - Senior National Accounts Manager On Mar 3, 2016, 03:00 AM
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Equipment acquisition decisions are more involved than just picking which models to stock in your rental fleet. They also include your plan on how to purchase that equipment. Whether you chose to buy or lease, you need to understand all your options to pay for your rental fleet and chose which one is best for your business.
Things to think about
Because only a fraction of your rental rates go to paying down your equipment purchase (For example: If 86% goes to paying down the cost of a machine, then 14% will need to go to paying company overhead costs – staff salaries, tools and supplies and so on), you need to carefully consider how you plan to pay for your equipment purchases.
This decision is more involved than simply what the upfront purchase price or even what your monthly payment would be. Things to think about before you sign on the dotted line of the purchase agreement are:
- Are you fundable?
- If yes, what financing options are available to you?
- If no, do you have enough cash on hand to purchase the equipment outright?
- What discounts are available for paying cash? What financing or lease programs are available?
- What is your exit strategy to move equipment on and off your books?
- What trade packages does your equipment supplier offer?
- How will your equipment supplier work with you to rebalance your rental fleet if/when you need to move equipment on and off your books?
- How do you realize your rental company’s rental return on capital investment (rROIC)?
- Aside from equipment rentals, what other ways does your rental company make money?
Answering these questions will help you determine if it is best to pay cash, lease or finance your equipment. Once you have made the decision, it is important to partner with a credible financial institution to fund your purchase.
Access to financing
Rental customers’ finance behaviors have not changed for many years; however, access to credit has been difficult in the past decade. Even as the rental market has grown, credit for rental store owners is still tough to come by in the open market.
No matter what the market is doing, financing will always be a critical piece of the puzzle when it comes to buying and selling Genie® equipment for your rental fleet. The key to credit access is that a customer has prior credit history for comparable credit amounts and has demonstrated a consistent ability to make payments on time throughout this tough economic environment. Terex Financial Services (TFS), like Genie, is an integral part of Terex Corporation, and given the importance of financing, can play a very helpful role in your equipment acquisition process. ,.
Available worldwide, TFS offers a comprehensive range of effective finance and leasing solutions, structured to complement rental customers’ cash flow and budgets, such as Commercial Lease and Loan structures including seasonal, deferred and step-up payments. Working tirelessly to provide credit access to Genie customers, TFS aims to provide low rate financing options across the Genie® product line at attractive interest rates. TFS’ credit capability is well above the norm and allows our rental customers access to credit that they otherwise might not be able to access.
Many rental businesses in the construction industry still prefer to own their equipment, so TFS professionals know the importance of working closely with Genie rental customers to understand their unique business challenges, as well as their financial goals and requirements. Obtaining financing is often a time-consuming task, so TFS also works hard to provide a reliable, flexible and responsive service.
The TFS team assists in all areas of asset management, from the analysis of future equipment values through the disposal of used equipment. Again, the key is to establish a positive and lengthy credit history and to have available updated financial statements throughout the year.