Options for Acquiring Heavy Equipment

No additional fees: The greatest benefit of paying in full at point of sale for equipment is that you won't pay more than the sticker or negotiated price because there are no interest payments.

Smooth transaction process: Typically, paying in full for equipment at point of sale is a fast transaction because additional time is not required for financing documentation, evaluating credit worthiness and approvals. 

Increase business assets: A cash purchase of heavy equipment is considered a capital expenditure, meaning it’s recorded on the balance sheet as an asset. Assets increase the valuation of a business and can create new financial and growth opportunities.

No operating expense deductions: Buying heavy equipment outright can prevent a business from being able to deduct monthly operating expenses, potentially increasing the annual tax burden. Consult your tax professional or accountant to find out more about the tax deductions you may qualify for.

Budgeting for depreciation: In business accounting, a capital expense, like heavy equipment, should be depreciated over the expected service life of the equipment. To plan for replacing this equipment in the future, businesses that purchase equipment outright must set aside a percentage of their monthly budget, which can be difficult to do during less profitable times.

Build equity: Owning equipment adds equity to your business, which you can then leverage to borrow more money or potentially earn a profit on resale or trade-in. 

Build business credit: For new businesses or businesses that don’t have a long credit history, financing your heavy equipment can help build your business credit rating and improve your ability to get financing for other business investments in the future. And, at Cat Financial, we don’t exclude businesses simply because they are new. 

Carrying a liability: Until you own your equipment outright, your machine will be considered a business liability on the balance sheet. Liabilities can impact your business valuation.

Higher costs: Monthly payments of loans are typically higher than lease or rental payments and usually include interest on the principal amount, but special offers can sometimes offer no interest for a limited time. View equipment financing offers from Cat Financial.

Commitment: By purchasing equipment through a loan, you’re likely committing to that specific machine for the duration of the loan and beyond. It’s important to purchase the right equipment for your business to maximize your investment, including the right model and size. You’re also responsible for maintaining and repairing your equipment. With a lease (detailed below), you often return the asset before any major repairs are needed.

Lower monthly payments: Typically, the monthly lease payment is lower than a loan as you're primarily paying for the use and cost of the depreciation of the asset. 

Flexibility: We know that not all businesses are the same, which is why qualified customers can create a payment schedule that works for their business.

Multiple Options: At the end of the term, you decide what to do with the equipment. Extend the lease, return the equipment, or buy the equipment outright at a predetermined interval.

Higher long-term costs: If you plan to lease for an extended length of time, the long-term costs can be higher than a loan because you aren’t paying down a principal value.

Restrictions on customizations: Because Cat Financial remains the legal owner of the equipment, you aren’t necessarily able to customize, modify or use the equipment under a lease agreement the same way you could with a loan or cash purchase.

Flexibility: Rentals provide one of the most flexible ways to get the equipment you need when you need it. This flexibility is particularly convenient if there’s a special type of equipment or work tool you want for one-time use.

The ability to try before you buy: Equipment rentals give you the opportunity to test out the latest machinery and technology before you make a purchase investment. You can ensure you choose the right type and size for your project needs.

No equity: The main drawback of renting heavy equipment is that you don’t own an asset and you're not building up the equity in your business that ownership offers.

Increased long-term costs: If you decide to extend your rental agreement or need to rent the equipment for additional or long-term projects, then the cost-effectiveness of renting diminishes over time.

Potential for limited availability: One risk of relying on equipment rentals is that during peak seasons, the equipment you need might not be available for the time you need it. When relying on renting to supplement your equipment needs, it’s critical to partner with a top rental provider that has an extensive network with sufficient options to choose from.