Buying or Leasing Construction Equipment - Which Is Better?

Whether you are supervising a construction site or starting a construction business, the ability to manage your costs is of the utmost importance. As such, deciding whether to buy or lease equipment is a critical consideration.

Ultimately, whether you should buy or lease construction equipment depends on several factors, including the duration of the project, upfront capital and immediate needs, and how much control you want over the maintenance and usage of your equipment.

Here are several pros and cons of buying or leasing construction equipment to assist in determining which option is best for you.

Buying Construction Equipment

Just like some prefer to buy a car instead of leasing one, some prefer simply to buy their construction equipment instead of leasing it for a set term.

Usually, it makes sense to purchase construction equipment you plan on using almost daily. Equipment owners also have full control over equipment maintenance, and can claim tax deductions for depreciation, insurance, and interest and repair expenses.

Pros of Buying Construction Equipment

• More economical for longer term needs.
• Equipment owners can normally depreciate the entire cost of the machine in the first year, versus only the payments in a lease.
• Owning equipment means you can modify it however you want. It also means you can service or repair your equipment as needed, instead of waiting on the availability of the leasing company.

• Buying can be easier because there are no agreements and contracts you must follow.

• Generally more expensive for short-term needs.
• Buying offers little in terms of flexibility.
• If you are operating a job site, or multiple, buying will prevent you from quickly disposing of equipment as work slows down.

• Construction technology is always evolving, which means the equipment you buy today could be outdated in short order – making it hard to repair or sell.
• When owning equipment, you are fully responsible for all maintenance, which can be expensive.

Leasing Construction Equipment

An equipment lease is essentially a loan arrangement in which the lender owns the equipment and leases it to a contractor at a flat monthly rate for a specified term.  Leasing construction equipment provides some of the benefits associated with ownership of equipment, while mitigating the downsides of ownership. When the term ends, the lessee can decide whether to buy the equipment, return it, or upgrade to something better.

Pros of Leasing Construction Equipment

• Lower upfront cost with predictable monthly payments.
• You can upgrade to newer technology at the end of the term.
• Most equipment leases come with service packages, meaning you are not responsible for the costs of repair and maintenance.

• Leasing is often 100% tax deductible as an operating expense.

Cons of Leasing Construction Equipment

• Fixed term with obligations that you must keep (e.g., 24-month lease)
• You cannot use equipment purchases to build equity, or sell the equipment back at the end of its term to make some money.
• The contractual term of the lease could be longer than you need the equipment for. This could lead to money and space wasted.
• If the equipment breaks down, it may take a while for a lessor-approved technician to service it.

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