Keeping your CASE equipment up-to-date is important for ensuring optimal performance and efficiency in your operations. However, upgrading and replacing equipment can present financial challenges for your business. The upfront costs of purchasing new machinery can be substantial, and many companies may struggle to find the budget for these purchases while maintaining cash flow and profitability.
Concerns about financing terms, interest rates, and overall affordability also add complications when deciding whether or not to pull the trigger on a purchase. However, there are often different kinds of financing options available to businesses. The challenge is figuring out which one is right for your circumstances.
Let’s take a closer look at some construction equipment financing options and how they can help your business overcome the challenges of upgrading CASE equipment.
Traditional Loans
A traditional construction equipment loan functions similarly to a car loan, offering a familiar and accessible way to finance your new CASE equipment. Just like with a car loan, you’ll borrow a specific amount to cover the entire cost of the equipment. Then, you’ll repay the loan with fixed monthly payments over a predetermined term, typically ranging from 24 to 60 months.
Traditional equipment loans are secured loans, meaning the CASE equipment itself acts as collateral for the loan. If you fail to make your payments, the lender has the right to repossess the equipment.
There are several advantages to using traditional equipment loans to upgrade your CASE machinery. First, they allow you to spread out the cost of the equipment over several years, easing the burden on your cash flow. This can be particularly beneficial if a large upfront payment would disrupt your finances.
Second, the fixed monthly payments also offer predictability in your budget. You’ll know exactly how much you owe each month, which can simplify financial planning for your business. In some cases, there may even be potential tax benefits, as interest paid on equipment loans may be tax deductible as a business expense.
While taking out a loan to finance your new CASE equipment can be a smart move for your business, there are some things to keep in mind before choosing this option:
- Interest Rates: Interest rates on heavy equipment loans can vary depending on your creditworthiness, loan term, and lender. Shopping around and comparing rates from different lenders is recommended to get the best deal.
- Down Payment: While not always required, some lenders may ask for a down payment on the equipment loan. A larger down payment can result in a lower overall loan amount and potentially a more favorable interest rate.
- Loan Term: The loan term will impact your monthly payment amount. A shorter loan term will result in higher monthly payments but you’ll pay less interest overall. A longer loan term will result in lower monthly payments but you’ll pay more interest in the long run.
Construction Equipment Leasing
Leases are also a popular option for heavy equipment financing and can be a good alternative if you prefer lower upfront costs. With a lease, you essentially rent the equipment for a predetermined period and make fixed monthly payments. There are typically two options for what happens to the equipment at the end of a lease:
- Fair Market Value (FMV) Lease: With this option, you have the opportunity to purchase the equipment for a pre-determined fair market value at the end of the lease term, which can be beneficial if you think you might want to own the equipment.
- Operating Lease: At the end of an operating lease, you return the equipment to the lessor/financing company. This option is beneficial if you only need the equipment for a specific project or timeframe and don’t plan on owning it long-term.
Compared to traditional loans, heavy equipment leasing typically requires a smaller down payment or sometimes no down payment at all, freeing up cash flow for other business needs. Lease payments may be tax-deductible as a business expense. However, this can be a complex area, so it’s important to consult with your tax advisor to understand the specific tax implications of lease financing for your business.
One thing to keep in mind is there may be restrictions on how you can use the leased equipment, such as limitations on mileage or operating hours. It’s important to carefully review a lease agreement to understand any restrictions that might apply.
Additionally, while lease payments might seem lower initially compared to loan payments, you likely won’t recoup any of the lease payments you’ve made. This can make the total cost of ownership over the lease term greater than with other equipment financing options.
Trade-In Programs
Many heavy equipment dealers offer trade-in programs that can allow you to get the most value out of your existing equipment and significantly reduce the upfront cost of your new CASE machine. Here’s how it works: When you trade in your old CASE equipment, the dealer evaluates the condition, age, and functionality of your old CASE equipment using industry standards to determine its current market value. If your trade is accepted, that value is applied toward the purchase price of your new one.
For example, say you have an old skid steer that has a trade-in value of $10,000. This would effectively act as a $10,000 down payment on a new CASE machine, significantly lowering the amount you would need to finance or pay upfront. Essentially, you’re turning your old equipment into a credit that goes towards your new CASE investment.
When you’re ready to trade in your existing equipment, a dealer will assess the condition, age, and functionality using industry standards to determine fair market value. Then, that credit can be applied toward the purchase price of your new CASE equipment, reducing the overall amount you need to finance or pay upfront and making your upgrade more manageable and cost-effective.
Upgrade with New or Used Equipment from RPM Machinery
Whether you are in the market for new equipment or used equipment, RPM Machinery not only has the inventory to suit your needs but also financing and leasing options to fit your budget. We proudly serve the construction industry throughout Indiana and work with CNH Capital – the same financing company that CASE partners with – to offer the following solutions:
- Working capital loans and leases
- Sale and leaseback
- Specialized loans involving balloon or seasonal payments
- Dealer inventory finance programs
- Rental fleet finance programs
Construction companies large and small trust RPM Machinery when they need construction vehicle financing, options for purchasing equipment needed to grow their businesses, and exceptional support and service throughout the process. And we can help your business too.
Contact our sales team today and tell us about your current construction equipment needs. We will work directly with you to find construction equipment financing options that fit your budget and business goals.
