Leasing Equipment?

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austinframer

Grumbler in Training
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May 29, 2008
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Do any of the major manufactures lease the biggest equipment such as mat cutters, saws, v-nailers, presses and that sort of thing? I am looking at opening a new shop but am trying to get the best equipment with reasonable start up costs. Thanks for any information.
 
Equipment can be leased, providing the total dollar value makes it worthwhile to the leasing company. But be aware that it's harder to qualify for a lease than for a loan, as there is a greater incidence of default.

Leasing is also an expensive way to acquire equipment. So much so that I often suggest using a credit card (or two) as an alternative to leasing. At least with a credit card, whose carrying charge is about the same as leasing, you can pay it off early without penalty. That's not generally true with a lease.

If your main objective is to conserve cash, you could consider a lease, but if you compare the total cost of your lease payments versus other alternatives, leasing would not be my preference as the total cost is very high.
 
There are certain advantages to leasing but as Paul said it is generally better to purchase equipment for your frame shop if you have the resources.

On the surface it does generally cost more to lease than to finance although I wouldn't advise purchasing equipment on credit cards. There are less expensive ways to finance and credit cards are too easy of a way to make your debt spiral and missing payments due to unforeseen circumstances can put your fees and interest rates to obscene levels.

Leasing frees up capital. Your ability to get additional financing for business expansion or emergencies is not as compromised if you lease because you have not spent available funds or pledged personal or business assets with a lease. Yes, a lease is a financial obligation and should always be considered a liability however your ability to utilize or dispose of your owned assets is not encumbered by a lease as they would be if pledged on a bank loan. There are definite tax advantages to operating leases and the taxing authorities watch closely for abuses.

There are two main types of leases also to consider:

Operating leases are treated for accounting purposes as monthly expenses. The leased equipment is not carried on your books as an asset or liability. The lease payments are simply monthly expenses. Generally an operating lease will have a fair market value buyout at the end which is not stated as a fixed amount.

Capitol Leases are leases with a predetermined buyout value among other factors and the leased equipment must show on your books as a depreciable asset and the lease obligation as a liability.

Here is a link to a good site which further compares these two types of leases and their respectful pros and cons:

http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AccPrimer/lease.htm

There are many reputable independent leasing agents and leases can be written for any type of equipment and tailored to your needs. In my experience a good independent agent can generally beat a manufacturer's lease unless the manufacturer is promoting leasing aggressively as a sales tool and underwriting part of the lease themselves. Most manufacturers use a finance company of some type to fund their leases and do not carry the leases themselves or they have a separate leasing company handle the transaction.

If you are weighing the advantages of leasing vs. financing I'd research as much as you can and then consult a CPA to consider the advantages and disadvantages of both as applied to your unique situation and needs.
 
I would look for a going out of business sale. It seems to me that there has been alot of shops closing doors this year and a lot of equipment that is only a few years old out there collecting dust while for sale. It's a buyers market.
 
When you are first starting, your main objective should be to control your monthly fixed expenses. Having loans or leases will increase that number and put you in a position where you find yourself really scrambling every month just to meet those fixed costs. You have your rent, taxes, possibly payroll, supplies, utilities, the money you need to survive aside from the business, and then loans and leases.

I would rather have used equipment that works fine and has no debt over monthly payments on nice new equipment that may or may not do any better than old equipment.

Your business will be judged on what goes out the door, not whats behind it.

To answer your question, look in the phone book under "equipment leasing" or just ask the company who is selling you that nice new stuff if they offer in house leasing or do they have a leasing company they could refer you to.

John

2
 
I agree that there are deals to be had on good used equipment and it is the way to go especially if money is tight. Many independent leasing agents will set up a lease on used equipment too if that is necessary.

As an example of the reliability of much of the equipment framers use if it is well maintained ...my Morso works like a charm. It was purchased used by my grandfather in the early 1960's! I have no idea how old it really is but it is fully functional after well over 100,000 frames.

I wouldn't even consider buying new equipment now unless money was plentiful or there is a revolutionary developmental improvement in some piece of equipment which makes existing equipment outdated.

The only example of equipment I can think of that you may want to purchase new for warranty and support would be a CMC.
 
Thanks Keith!

Well ...maybe a bit of family framing lore was dispelled or what people say about me tending to exaggerate was proven true. My Morso Is # 7132 which would place it's date of manufacture as 1966. Either my memory failed me or gandpapa lied to my grandmother and said he bought it used to appease her sense of thrift!

Still 42 years and over a hundred thousand frames later it's holding up at least as well as this old @&#!


:D
 
My Morso, #1883 was made in 1955, I was made in 1952. It is holding up better than me.


So the moral of the story is, if you want a chopper, buy a Morso, they will last forever and are easily repairable. Mine was a rusty old beast that I stripped and repainted and re-blued the engraved scale and she looks "real purty" now!
 
Hey I can't wait to check my morso tomorrow.

Its simplicity is its beauty for sure. Thats also why I prefer my Pistorus VNM underpinner. There is about 3 moving parts and it all steel. Since it's purchase like 20 years ago we have had to replace the rod that pushes nails once and the huge screw that holds the sprocket broke once. Both were 10 minute fixes. You'll never get that kind of reliability and ease of maintenance out of a pneumatic machine. Don't get me wrong, I may replace these two pieces with something newer and powered when they break. When ever that will be?

The question of leasing is interesting. Are we talking about a financed purchase or a rental? I rent my wizard and have no plans to buy it. The maintenance on it is significant. Another reason rental maybe a good idea is to try it before you buy it. If I were to buy a CMC, I'm not sure I'd pick this one. When you buy it, you don't get to change your mind so easily.

Also as John said, cash flow is critical. If you can't buy used or lease, maybe a rental is an option for a CMC anyway.

Good luck!
 
Well Jay, just about the time you want to say "never", you can rest assured that someone will come up with a "yeah, but" and that is my case with my Euro 9009 pneumatic underpinner. I bought it in 1988 from John Knoell and Sons and have not had to replace one single part from mechanical breakdown in that time. (where the heck is that knock on wood smilie??) The only problem I have with the underpinner is a small air leak around one of the fittings buried under the framework of the underpinner and that doesn't affect the operation of the machine one bit. I can't give an estimate of how many frames I have built in the 20 years of operation of that machine but suffice it to say that it has never sat and collected much dust from non-use.

I did purchase the oversized steel table tops from Knoell and Son right before they closed up their business so I could handle the larger profile mouldings but that is an improvement rather than a replacement part in my opinion.
 
Tom..my Euro is the best piece of equipment in the shop...had it 10 years and NO problems whatsoever....too bad they don't sell em here anymore ( do they still make them and are they available in europe?)
 
It's my understanding that the plant shut down operations in Germany and that closing, combined with John Knoell's ill health, was the main reasons that they closed their business here in the states. I assume that you bought your underpinner from them as they were the sole distributor for quite some years in the US.

I should have bought extra drivers and springs from Knoell when I bought the extension tables but I didn't. The parts are very pricey and I just didn't want to spend the money at the time.
 
Speaking of leases...

The most aggravating topic brought up when "wheeling and dealing" to purchase a new vehicle is:

"You ought to consider leasing it. If you lease it........................................... etc., etc., etc."


When i purchased my last new vehicle (2008 Ford Escape) a couple of weeks ago I warned the salesman: :smileyshot22: If you mention in any way the word "L-E-A-S-E" i will go to another dealer and spread a bad rumor about you and the dealer... (Wow! It worked! The five letter dirty word "LEASE" never came up!)

I don't believe in leasing anything at all, including framing equipment. I rather own it. When i purchased my Wizard CMC i spoke to a salesman and said i was interested in purchasing one, the word "lease" never came up because I did not bring it up. Thanks Wizard...
 
And the compressor and airlines have been maintenance free as well?

I have had almost no issue with my Wizard cmc. Yet in 4 years, I'm on compressor number 3 and thats the only piece of equipment that uses a compressor.

I think I've got a really heavy duty one now but just draining the tank is more maintenance than the underpinner and chopper combined. It's splitting hairs but its still the fact.
 
Economics 101

Jay H said:
... I have had almost no issue with my Wizard cmc. Yet in 4 years, I'm on compressor number 3 and thats the only piece of equipment that uses a compressor...
Click to expand...

Interesting Jay,

We're still using our original Silentaire Compressor from 1999 now running it's second CMC! :)

It was more expensive in the beginning....but perhaps not in the long haul.

John
 
j Paul said:
My Morso, #1883 was made in 1955, I was made in 1952. It is holding up better than me.


So the moral of the story is, if you want a chopper, buy a Morso, they will last forever and are easily repairable. Mine was a rusty old beast that I stripped and repainted and re-blued the engraved scale and she looks "real purty" now!
Click to expand...

We bought ours in 1977. A lot of replaced worn out parts, but it chops very well considering our volume. It's the oldest piece of equipment in the place, except us!
 
We buy framing equipment usually on a short term payment plan with a dollar buyout. Then we have the benefit of the equipment for years to come without payments.

Cars? We lease the business SUV and turn it in ever 3-4 years. New car, new safety features, no repair bills, tax deductible payments for the percentage of business use.
 
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