To buy, or not to buy? Or maybe to lease is really the question. It’s a decision all contractors make from time to time, some more often than others, when it comes to acquiring vehicles and equipment.
With advances in technology making older models obsolete, and with larger service areas wearing vehicles out faster, turnover is more frequent than it used to be. The good news is that there are more options for operators, both in how they acquire new trucks and equipment, and how they pay for them.
Uncertain economic times have led dealers to get creative in financing, allowing shoppers the option of leasing or buying, as well as the choice of paying with cash, credit card, dealer financing or bank loans. The financing itself is more flexible: much longer payment terms are available. Here are some contractors’ ideas on financing that may help you when it comes time to get your next big rig.
Jerry Fannon and his father, Lloyd Fannon, co-owners of Bio Remedies, have been serving El Paso, Texas, with line inspection and cleaning and pipe bursting for 16 years. They need a lot of vehicles to keep their crew of 14 on the road and productive. Whether they lease or buy depends, in large part, on “whether or not we have a line of credit going at a bank or other lender,” Jerry Fannon says. “It’s not really a hard line that says, ‘We’re going to lease,’ or ‘We’re going to buy.’ It usually just boils down to our finances and if we can get a decent interest rate.”
Lloyd Fannon says the lease versus buy decision often comes down to affordable payments. “A lot of times it depends on the money. Sometimes when you lease, the payments can be cheaper, and it’s harder to arrange financing for a buy, especially if you’re just starting out in business.
“You can usually find someone willing to lease to you even without a big down payment. And then you don’t have to worry about what you’re going to do with it when it gets old. You can turn it in if you’ve kept good care of it, or just buy it out.” The Fannons enjoy this kind of flexibility.
“But after that,” Lloyd says, “we’ve tended to end up buying, once we know what we like. And after having made enough lease payments, your credit gets better and your options open up. So you can make the choice based on what’s best for you at the time, which can change. Lately, we’ve just been financing through our local banks, and sometimes we even have enough saved up that we can just walk up and pay cash.”
The lease-to-own option is increasingly attractive to Gary Suiter, business division manager, and his colleague Desmond Hannon, equipment buyer, for B. Frank Joy LLC in Hyattsville, Md. The company moved into the drain and line cleaning business two years ago. Until then, the 90-year-old company had worked in the power utility field.
“After we have a piece of equipment, we know when it makes sense to replace it,” says Suiter. “We replace more frequently than most probably do, because our jobs require us to go places that can be hard on equipment.” That is another good reason to buy out a lease — so there are no penalties incurred for damage and repair.
Joey Hathcock, co-owner of K D & J Plumbing of Gadsden, Ala., uses leasing almost entirely. “After 30 years, we’ve established a good enough relationship with our local truck dealership and a strong enough credit rating that all we have to do is walk in, say what we’re looking for, and wait for a call,” Hathcock says. “They locate the vehicle we want and arrange the financing. All I have to do is sign the paper and drive away.”
He appreciates the ease and time-saving nature of these transactions, since he’s always busy managing the firm and its 14 employees. The company guarantees on-time arrival of its technicians to each call, so there is no time to fool around with broken-down vehicles. Crew members appreciate the reliability of late-model trucks and equipment.
The company also prides itself on professional appearance, right down to its uniformed employees; so looks count in the fleet department, as well. “We always have a clean, new-looking truck with all the latest features,” Hathcock says.
“Leases are also easier to get into and get out of, and these days, leasing isn’t as expensive as it used to be, so it’s generally the way for us to go. We’ll buy equipment such as a jetter or other piece that we know will outlast the lease, but we make sure it’ll be a good investment before making that commitment.”
That means dependable models for the company’s sewer and industrial waterjetting service, video pipe inspection and location, and sewer and drain cleaning business.
