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What To Consider When Acquiring New Equipment For Your Business

Stride Capital on August 13th, 2024 in   Monthly Blog

Thinking of acquiring some new equipment this year? Whether you are on the west coast of Canada or the east coast like I am, you are likely asking yourself the same questions about your lease term, payments, and overall structure for new or used equipment. In fact, business people across Canada are looking for ways to operate their fleets as efficiently and cost effectively as possible.

So, what do you need to consider when adding a new piece of equipment to your fleet? Here are a few things to consider both from a fleet and leasing perspective:

  • How often you use the equipment
  • What your fleet replacement cycle looks like
  • Whether or not you have the capabilities to fix and maintain the equipment yourself
  • What warranty new equipment comes with
  • Cost differences between new and used equipment
  • Cost differences between maintaining a used machine and purchasing a new machine
  • Availability of parts and service

Additionally, these are really important things to be discussing with your Stride Capital leasing expert. Why, you ask? If someone is telling you what term and structure of a lease you should be taking and they are not asking a few basic questions, they really aren’t doing their job to set you up with the proper lease or structure required for your unique business.

Far too often, I have had clients request a 36-month term without a strategic reason beyond just wanting to pay it off as soon as possible. 

When discussing new equipment with our valued clients, I like to ask the following questions to see if I can provide some support for the financial side of their business:

  1. When do you plan on replacing the asset? Can we structure the term to match that replacement? 

    Because we would like to set the term for the useful life of the machine, this will also keep cash flow in the business and not depreciating over the 36 months.
  1. Have you talked to your accountant about leasing vs. buying with cash out of the business? 

    This is something that most small businesses without an accountant on staff don’t do, but should. Ask your accountant the impact of having the lease expense and what this looks like for your business. They are the expert on your balance sheet/financials and get paid to help you with this.
  1. What will be the “fair market value” of your equipment at the end of the term? 

    From my experience, If you have 35% or more of the capital cost of your equipment left at the end of the term when it’s time for resale, you haven’t structured your lease properly. Taking a longer term and the lease expense would be more effective; most accountants will tell you that they can write off 100% of this payment. Another great way to structure is with a residual or balloon payment at the end of the lease.

These are all items you should be discussing when adding a new piece of equipment to your fleet. What if your business could have additional cash flow to buyout a local competitor? What if you could save money on your taxes by having a lease expense? Maybe you could add additional equipment and scale your business? 

Your Stride Capital Account Manager is here to help you achieve these goals with equipment financing. 

If you are in Atlantic Canada, get in touch with me any time to discuss your leasing needs.

Darren Aiken
Account Manager — Atlantic Canada
902.318.3404

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