Leasing equipment at a municipal facility Cancel The title field is required!

1. Darren Graf

   

   0 posts
   
   12/4/2015 11:12 AM

   Guys,
   Currently I have a fleet of 5 toro mowers, 2- 3150Q greens mowers, 2 5410D fairway mowers and 1 4500D rough mower. They are 5 years old and starting to cost some money with repairs and service because of the wear and tear of everyday use. I have been asked to get pricing on leasing this equipment for 5 years and always rolling over into new equipment on a 5 year basis. The price tag for this is very high but I know we will always have great top of the line equipment without any repair headaches because a warranty with service is included in the lease. I just really don't know how to justify or even promote this purchase when it would be 60-70K out of my budget every year. What is a better option repairing what we have (which is quality) or replacing before problems start. Any help would be appreciated.

   
   
   
   
2. Steve Nelson

   

   0 posts
   
   12/4/2015 1:12 PM

   Most municipalities buy because the tax implications of a lease deal don't really apply to them. Also in my experience most municipalities have a rolling stock replacement fund which further makes buying outright the most logical way to go. Buying equipment from a capital fund in that scenario affects the operating budget less than a lease would. You and the finance dept. will just have to pencil it out and figure out what's best for your operation.

   
   
   
   
3. David Brandenburg

   

   3 posts
   
   12/8/2015 6:12 AM

   Darren,
   
   One thing to consider is on a lease to own the equipment is "owned" by the municipality and in turn exempt from property taxes. In a true lease the equipment is owned by the leasing company and most contracts allow them to charge the municipality back for the property taxes.
   
   In this case you city would be the ones charging property taxes so it is possible you can get them not to charge them in the first place. In our case we are a county course in the city limits so we were surprised to be charged property taxes on our leased cart fleet. My first reaction was "we do not pay property taxes". But the response was, "you do not pay property taxes but we do and you have to reimburse us"
   
   The benefit of the lease is your payment is a constant number for 5 years and your equipment is getting turned over regularly. Run the numbers on purchasing something every year for 5 years and then keeping it for 5 years and trading it in vs the lease program.
   
   If you can turn over mowers every 5 years that is great. We are closer to 10.