Construction Equipment Financing

Written by Jill Morrison
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Construction equipment financing is a popular financial alternative for many businesses. However, many companies do not know whether leasing or buying equipment is best for their situation. It is important to compare options and recognize the differences between leasing and buying construction equipment before making any decisions. Companies must also decide whether to pay cash or to obtain a loan for construction equipment.

Construction Equipment Financing Options

There are three different ways to obtain construction equipment financing. Buyers can pay for their equipment with cash, a lease, or a loan. About 90 percent of buyers cannot afford to pay cash for heavy duty construction equipment, so the main concern is usually whether to lease or buy. There are advantages and disadvantages for both methods.

Leasing construction equipment is similar to renting. In this case, you pay for the equipment for a designated period of time and return the equipment when your time has expired. Leasing periods usually last between 36 and 60 months. Sometimes, you can choose to purchase the equipment at the end of your lease term at the residual value. Leasing gives you the opportunity to try out equipment before deciding to purchase it.

Buying construction equipment is a good idea if you know exactly what sort of equipment you would like to own. Most businesses will need construction equipment financing, or a loan, to help them pay for equipment. Loans require buyers to make monthly payments over a certain period of time. Buyers will also have to pay interest charges in order to obtain a loan when buying construction equipment.

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