Equipment is one of the biggest expenses for landscape contractors, so it pays to do homework before adding a new machine. Whether that’s renting, leasing or buying, dealers can offer insight and information to help make the best decision.
Tax credits
Greg Black, owner of Black Landscape out of Mechanicsburg, Pa., turned to his dealer, Groff Tractor & Equipment, when he was growing his fleet. The dealer laid out how renting, leasing or buying fit into his business.
Black’s company, which does about $3 million in annual revenue, offers landscape design/build, maintenance and snow removal services. It also has a garden center. Its customers are about 70 percent commercial and 30 percent residential.
After considering the options, Black decided to lease most of his equipment. He liked that the monthly payment was lower than with ownership, with maintenance and warranty included.
The leased equipment includes compact excavators, backhoes and skid-steers. He leases to own some machines, like larger wheel loaders used for construction and snow removal.
Pros and cons
When deciding between renting or buying, landscape contractors should consider factors like ownership cost, tax benefits, storage space and amount of use, says Corey Berkheimer, vice president of sales for Groff Tractor & Equipment in Mechanicsburg, Pa.
If you are using the equipment 65 percent of the time, buy; if not, then rent, Berkheimer advises.
The benefits of renting include only paying for the equipment when it’s needed and not having to deal with maintenance or other equipment issues. However, if equipment is needed for an extended amount of time, renting would be more expensive. There also can be issues with availability.
When contractors own a machine, they are able to sell it at any time, and there are tax incentives available. The downsides are that they are responsible for all of the maintenance, and the equipment can become outdated with the rapid growth in technology, Berkheimer says.
“The majority of the time, we end up selling mini excavators, compact track loaders, skid-steers and compact wheel loaders to our landscaping contractors,” Berkheimer says. “This is due to the low operating cost per hour, which is driven by low monthly payments.”
Consider workload
When Kody Duke began growing his fleet, his dealer, Hills Machinery, talked numbers with him to see what option would work best.
“That’s why we came up with leasing,” says Duke, owner of Precision Landscaping in Lexington, S.C. “We’re able to swap them out every three years.”
Duke’s company offers landscape design/build, maintenance, irrigation, lighting and grading. Its customers are about 60 percent commercial and 40 percent residential. The company has $11 million in annual revenue.
Precision leases all of its 15 compact track loaders, Duke says, because they use them for eight to 10 hours a day.
“After three years, they get worn out,” Duke says. “Leasing has been cost-effective.”
When a job calls for larger equipment, Duke says he also factors in transportation and storage expenses. For smaller companies or ones just starting to offer design/build services, Duke suggests renting equipment.
“When you get more jobs, you can look into buying a machine. That helps you get used to it and test which brand is good for you,” Duke says. “If it’s not being used on the job every day, it isn’t worth buying.”
