# Leasing big equipment, bucket truck.



## Ghillie (Oct 17, 2012)

Anyone have opinions/facts on whether leasing a bucket truck is a good idea for a company that is four years old? 

The next logical step, equipment-wise, would be acquisition of a bucket truck..... Reliable bucket truck. 

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## TreeCareInc (Oct 18, 2012)

I have looked into leasing several times. Leasing has not made sense for our business. Your CPA will be a big asset in determining if it makes sense for your company. Leasing has different tax implications than traditional financing.


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## Ghillie (Oct 19, 2012)

TreeCareInc said:


> I have looked into leasing several times. Leasing has not made sense for our business. Your CPA will be a big asset in determining if it makes sense for your company. Leasing has different tax implications than traditional financing.



Thanks for your input. I was able to get to talk to someone at Altec Capital that was very informative. She took the time to explain all three of their lease options.

None of them sounded like they were the best option for my company at this time.

Going into this, the only thing I had heard about leasing were all horror stories. I was seeking information so that I could make an educated decision.

It will still be an option (in my opinion, for my company), but not the best option.


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## imagineero (Oct 21, 2012)

Generally it's not a great idea for a small owner operated business. As already noted, it's mainly a tax decision, and that sort of tax structure doesn't prove beneficial for small businesses. 

I can offer you a bit of advice from my own experience, but it won't be applicable to your situation. The web isn't the best place to get financial advice. As already mentioned, a CPA is the way to go. A couple hours of their time can save you a lot of $$$.

First, I'll tell you about a company I worked for who leased _everything_. I mean everything! This was a top 100 engineering company in australia, with many divisions (civil, infrastructure, engineering, mining etc) and was publicly listed. I was working in a branch in the engineering division servicing the mining industry. We had 150 staff at our branch and turned over about $2mil/month. We leased all our vehicles, the building, every piece of furniture, plant, equipment (welders, compressors etc), all our workshop gear, even all our employees were basically leased because they were hired from labour hire companies and not directly by us. I wouldn't be surprised if we even leased our stationary. 

The primary benefit was a tax benefit. All leasing costs can be recovered for tax purposes each quarter. Had we purchased equipment, that equipment would have been depreciated over time.... giving us a deferred tax asset which we may never been able to take advantage of if we didn't have future earnings. We could get greater tax deductions, sooner. The second benefit was that we didn't have to look after all that equipment. Storing, servicing, maintaining, tracking, repairing, deciding when to sell etc. It also neatly sidestepped the issue of needing to raise requests for capital expenditure, which is a loathesome maze in a large publicly listed company requiring much paperwork and report making. We could get a piece of gear, today, if we needed it. 

As it turned out, it was probably a good call. The industry collapsed during the GFC (it's historically a boom and bust industry anyway) and we were able to return all the equipment, and scale our staff back to about 20 core people in the space of less than a month. A company setup like this is sort of an empty shell, but it's quickly scaleable. When the industry picked back up, the company scaled up again. It was an absurd scenario - we would often pay more to lease small plant than it would cost to purchase the same piece of plant! Like 3 or 4 times more, over a 12 month period. We would then lose, or damage the plant and have to pay to replace it. But under the rules, regulations and structure of large publicly listed corporations, those things are day to day expenses, and neatly tie in to tax affairs and reporting to shareholders. Expensive as they may be, they don't create a 'future mess'. It's all mess today, which is easier to handle.

Lots of the above benefits really don't apply to small businesses, who use their own money much of the time, have one person in charge, no shareholders, and not an enormous amount of taxable income. There are lots of other ways to reduce your tax liability. Small business owners make the mistake of getting into (inflexible) lease agreements because they don't have capital or credit to purchase equipment, but they want to have it. Overall, leasing is more expensive than buying. It also ties you into repayments which puts you in a tight spot if the market changes and you can't return the equipment. 

Medium sized businesses often end up having to keep updating their equipment to get tax advantages. Depending on your turnover and taxable income, you may find that you can put more money in your pocket by borrowing to buy, purchasing new (or used), depreciating for tax purposes over a 3 year period then selling and borrowing to buy again. It gives you more working capital because you are borrowing instead of using your own money, and the interest is all deductable. You get the 1/3 tax deduction on depreciation each year which puts a lot of money that was going to the tax man back in your pocket. But it does create a cycle.

The sort of scenario that will work for you is very dependant on the structure of your company, your assets, turnover and taxable income. Get some advice from someone who really knows.

Shaun


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## TreeGuyHR (Jan 18, 2013)

In my area, I am organizing beetle infested pine removal. It sure would be simpler (and more profitable) to have my own skidder to get logs to where a self loader could grab them. I just talked to a neighbor of a likely property (five big pines, 32 - 49 in. dbh around 10 logs, five high grade) who has a skidder. He offered to help, but I suggested that I rent it from him instead to save the headache caused by him possibly getting injured or damaging something.

Questions:

Should I sign a contract for a period of time, or just a day or two within a time frame?

Should I offer to pay for any repairs in cash, or insure his machine on my insurance, or ask that it be insured n his?

Should I pay to have a mechanic inspect it first, to see if it is safe to run, and whether or not something is about to break which i would have to pay to repair?

I have a lot of questions. 

However, if I subbed the job to a logger (soup to nuts), most of the profit would evaporate. The guy has a skidder already on site, and is willing to make it available. I might even rent or lease a short flat bed and use it for a couple months. I believe I could do that on a regular license, or i might have to upgrade mine in a hurry. 

Any comments?


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