Finding the Best Articulated Dump Truck Finance Option

The sooner you can give a dealership representative an indication that you may be interested in converting rental arrangements to potential ownership, the better.

📅 Fri September 23, 2016 - National Edition


Whether you are moving dirt or aggregates in site development, road construction or any building project where mass excavation is required, an ADT can provide fast and efficient dumping.
Whether you are moving dirt or aggregates in site development, road construction or any building project where mass excavation is required, an ADT can provide fast and efficient dumping.

One of the reasons you may like renting an articulated dump truck (ADT) for your projects is the ability to have short-term access to high-capacity and reliable machinery for moving materials in any terrain you encounter — especially in muddy or difficult terrain.

Whether you are moving dirt or aggregates in site development, road construction or any building project where mass excavation is required, an ADT can provide fast and efficient dumping.

“ADTs are popular because they have the horsepower, torque and gear ratios to complete jobs efficiently,” said Brian Bereika, Doosan ADT product specialist.

However, ADTs can be one of the most expensive machines on a construction site if they are not fully utilized. Many business owners find it more economical to rent a machine before purchasing if work is not consistent on a daily or weekly basis. During that rental term, though, you could be quickly building equity that can be converted into a financing option towards ownership.

Put Equity to Work

Financing construction equipment is still a popular route to ownership because this equipment, unlike equipment in other industries, typically is not faced by obsolescence. If you have already identified the future projects and resources to justify owning an ADT, there are some compelling finance options to consider. The three most commonly used types of financing in the industry include rent-to-purchase options, traditional loans and leasing. Equipment dealers are very adept at structuring rent-to-purchase option agreements that may be favorable for your business. In addition to the benefits of reducing fleet costs and eliminating service, an RPO may represent an opportunity for owners with a short-term need that turns into a long-term solution.

Manufacturers also are making attractive loan and leasing choices available for customers who would like to convert their current rental plan into ownership. Most offer below-market financing as low as 0 to 2.9 percent — rates that would not be available for you to secure through a conventional lender. At the same time, there is a growth trend occurring in leasing as the economy continues to improve from the long-lasting effects of the last recession. Leasing is an option that may provide a single and often lower monthly payment and may include a bundled extended warranty.

Choose Your Best Option

While the three most-popular financing options provide different advantages and benefits for your operation, the most important factors to evaluate with each option is how long you plan to keep the ADT, what target payment you require and whether you need flexibility to return the ADT without further obligation to the lessor.

Rent-to-Purchase Option

If you are hesitant to make a capital investment in equipment, a rent-to-purchase option agreement (RPO) may serve your short-term equipment needs. It can be structured to transfer a portion of a rental fee toward purchasing the machine, or you can return it at the end of the rental period. Although ADTs can be rented for a shorter term than loan or lease alternatives, the trade-off is generally higher rental rates.

Traditional Loan

With less loan delinquency in the market, it is much easier to secure financing today than a few years ago. Loan approval rates by lending institutions, manufacturers and the Equipment Leasing and Finance Association are up overall. Loan rates — especially those offered by manufacturers — are relatively low and attractive right now, and payment terms are usually longer. However, the most important aspects to evaluate with a loan are the term and the interest rate, as they are the primary drivers of the loan payment.

Leasing

A hybrid between a rental and a purchase, there has been an uptick in leasing solutions. Leasing typically provides the lowest payment scenarios and the best hedge for potential declines in equipment values. Because leases are structured only for the use of an ADT during the lease term, they enable you to customize a financing program to meet your business's cash flow issues, including budgeting, and transaction and cyclical fluctuations.

Less flexible than a short-term rental, leases can be an appealing alternative if you do not have an appetite for additional depreciation. Seasonal leases are still popular as they help to slot payments into their busiest months, and avoid payments during the off-season. Additionally, leasing equipment has different tax implications than conventional forms of financing. In most cases, the entire lease payment can be deducted as a business expense over the course of the lease contract; however, you should confirm your individual situation with a tax professional to be sure.

Determine the Crossover

Regardless of which route makes the most sense for you, it is important to determine and monitor the crossover point in which you have built enough equity in an articulated dump truck through rental that you could effectively lower your payment by exercising your purchase option. For example, let us imagine that you are renting a 30-metric-ton ADT for 6 to 12 months at rates that typically range from $8,000 to $12,000 per month, depending on your specific location and arrangement.

At the end of that term, you could have accumulated anywhere from $50,000 up to $150,000 in equity, which could represent more than 50 percent of the purchase price of a machine that likely has a good residual value. At this crossover point what matters more than the acquisition cost of the machine is finding the right finance option that will help you convert to ownership and set you up with a monthly payment you can afford to accomplish that goal.

In fact, the sooner you can give a dealership representative an indication that you may be interested in converting rental arrangements to potential ownership, the better. It is recommended that business owners have open discussions up front about the terms involved with applying rental fees. If you wait until the end of the term, some organizations may not apply the full rental amount that you accumulated to a purchase deal.

As you consider ownership of an ADT, you have already made a smart choice by renting a unit first. It is helped you better understand the performance of the machine, opened up lines of communication with your equipment supplier and provided an opportunity to explore your purchase options. If you have put your business in a position to add a truck to your fleet, it has never been easier to find a finance option that will convert your valuable equity into ownership for long-term productivity.