Financing Your Equipment

By Dan Gundacker

John Deere mower

Landscapers are prepping for warmer weather, and using the weeks leading up to spring to evaluate their fleets and make appropriate new equipment acquisitions. While it may seem like the toughest decision is which model to purchase, do not overlook another important factor in assessing business impact: how will you go about financing your equipment?

There are many options for landscapers, depending on whether they prefer to pay for a machine in cash, or spread payments out over time through leasing or an installment loan. While each option has unique pros and cons, many contractors utilize financing in order to sustain cash flow over time.

Financing is a great payment option for landscapers looking to spread out payments over a longer time period, allowing the opportunity to generate revenue as they pay down the balance. Work with your dealer to select a machine and identify your options. Most manufacturers either offer their own financing, or have relationships with lenders that can assist in streamlining the process. There are three financing options from which to choose: leasing, installment loan, or revolving loan.

An operating lease is a long-term agreement, typically a two- to three-year term, enabling you to make a fixed payment over a predetermined amount of time. At the end of the period you can exercise the purchase option, buy the machine and continue using in everyday business, or return it to the dealer — similar to automotive leases. Depending on the term, operating leases offer lower payments than installment loans of the same term, improving cash flow throughout the year.

Many landscapers find leasing attractive because it offers multiple business benefits. Because leasing encourages landscapers to rotate machines every two to three years, their equipment fleets have newer equipment, helping to eliminate the risk of potential downtime. Many dealers are able to match lease terms with warranty periods, ensuring the machine is under warranty during the entire length of the lease.

Depending on your dealer, there may be added benefits. For example, John Deere offers its Commercial Loaner Program, which allows customers to receive a loaner unit in the case equipment needs warrantable repair work. Through the program, John Deere alleviates the stress of downtime, allowing landscapers to focus on successfully running their business.

It is important to note that there are a few restrictions tied to leasing. First, there is typically a maximum amount of hours that can be put on the machine in order to return it with no penalties. Also, because the landscaper does not own the equipment, damage leads to depreciation of the equipment, which can also impact the return.

While loans, like leases, allow landscapers to spread out payments into multiple installments, the key difference is that at the end of the loan term the landscaper owns the piece of equipment. Because the landscaper owns the equipment in the end, there is no limit on hours, and damage is not a concern, making a loan the better solution for a landscaper who anticipates putting a large amount of hours on the equipment.

When speaking with the dealer or the lender, be sure to ask for any special offers. For example, there may be a special incentive offer, like zero percent interest for a specific time period that helps save additional money. You may be able to work with the lender to lower your payment during the off-season when you aren’t as busy and have less cash coming in.

For smaller purchases, including parts or handheld equipment, a revolving account may be the solution. A revolving loan is a credit account, allowing you to add parts, attachments and smaller components to an account, which are paid off on a regular basis. While this isn’t the best option for larger equipment purchases, this is ideal for larger landscape businesses with multiple crews.

When reviewing the options, ask yourself the following questions to determine which is best for your business:


  1. How long will I need the machine?
  2. Do I want to own the machine or operate it for the lowest overall cost?
  3. Am I interested in keeping up with the latest technology?
  4. Is there a financial benefit at this time for us to lease vs. own?

After answering these questions, discuss your responses with your dealer, identifying your business needs. For example, if leasing is an option that you are interested in to have newer equipment in your fleet, discuss setting up a long-term program to manage and rotate your fleet. Some landscapers prefer this program because it ensures they have equipment that is new and under warranty, limiting the risk of downtime and costly repairs. Even if leasing is not the best option for your business, your dealer may be able to work with you to create a financing program that is customized for your specific business needs.

Also consider those other needs, such as parts, handheld equipment and attachments, that some lenders, like John Deere, allow you to wrap into your financing package and give you the most bang for your buck. Many landscapers do not realize that routine maintenance can also be included. Your dealer will be able to help you identify what else you can add — making financing an enabling solution.

Once you and your dealer are able to pull together what you would like to include in your quote and identify the best financing solution for your business, set up a payment plan that fits your business. Many payment plans are flexible. It may be easiest to choose a payment date that coincides with your other bills each month. Additionally, looking at your financial history, identify periods in the year where your business cash flow is lower. Some manufacturers offer skip payments or seasonal payments for your benefit. John Deere’s latest initiative for contractors, called NeverStop Services and Support, packages the equipment, financing and leasing, loaner, fleet discounts, parts and more in one finance or lease package.

There are many options when purchasing a new piece of equipment, from outright buying a machine to leasing and installment loans. It is important to evaluate your business and choose the best option to encourage long-term growth. While longer-term notes and leases with lower monthly payments may be appealing, they may lead to larger costs down the road, particularly if the warranty ends. Your dealer is available to help simplify the process, guiding you along the way to ensure your business is positioned for success.

Dan Gundacker is tactical marketing planner at John Deere Financial.

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