Rising interest and prices are a daunting prospect for those in the market for new or used construction equipment. That leaves many wondering, should I wait for lower prices plus rates or should I buy now?
That questions and more is answered on this episode of The Dirt , which features guest Gary Evonsion, senior vice president associated with Crest Capital. Evansion delivers tips and techniques to help contractors with their equipment buying and financing decisions.
He also discusses tax breaks for companies who put machines into service by the end of the year and how that also helps when financing gear.
So to find out more about today’s equipment funding market and the best moves a contractor can take now, check out the latest episode of The Dirt above.
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In This Video:
- 00: 00 – Intro: Getting the particular Most Out of Finance Deals
- 00: 40 – The particular Impact of Higher Interest Rates
- 01: 32 – Should You Wait to Buy Products?
- 03: 40 — Private Party Financing
- 04: 22 – Section 179: The Tax Code That Helps You Save on Tools
- 08: 19 : Best Practices for Purchasing Devices
- 11: 27 – Conclusion: Apparatus Financing Guidelines
Video transcript:
Bryan Furnace ( 00: 00 ):
Hi everyone. Welcome back in order to Equipment World. You’re watching The Dust. I’m your host Bryan, and today we’re going to talk about financing equipment. Yeah, everyone knows how to finance equipment at a surface level, but we are going to coming in to a recession and I think everyone’s a little nervous on the whole financial game. Well, here in order to talk with me today is Gary from Crest Funds and he’s going to walk us through some of the tactics and techniques you can use to get the most out of your finance deal. How can you leverage that will in a way that would be the majority of impactful to your business? So without further ado, I’m turning this interview over in order to Gary.
( 00: 40 ):
So my first question is, after such a long extended stretch of having low interest rates, how is the Fed’s decision to raise interest rates going to impact contractors, and exactly how should they respond on their finish?
Gary Evonsion ( 00: 52 ):
What wish seeing in the market is the Fed’s raising interest rates are going to affect building projects, dirt projects in a couple ways. Material costs go up, interest rates on all those projects go up, so it’s going in order to put the damper upon some of that will. That’s the bad side of it. The good side associated with it, I guess, is infrastructure projects are still going on and they’re not as affected by interest prices. So I guess in short, exactly how a service provider should be proactive within making sure they’ve got their house inside order in terms of going after different projects, maybe diversifying, maybe thinking about getting equipment sooner than later before cost of equipment continue increase plus before rates if they’re financing it go up.
Bryan Furnace ( 01: 32 ):
Therefore that kind of ties directly into my next question here, which will be with material price increases and that resulting in higher equipment purchase costs, what has type of been the particular response associated with contractors? What have you guys been seeing?
Gary Evonsion ( 01: 44 ):
It’s really interesting. It’s already been something that’s been happening over the past, say, year, 12 months and a half. And it’s been, when we saw this particular happening, we didn’t realize it until looking back now, but there was a period of time where cost and things were going up plus people had been hesitant to buy because they felt, hey, the prices are going in order to come down again, whether which materials, whether it’s tools, whatever. And we saw a break probably about maybe six months ago exactly where all of a sudden people realized, Bryan, prices aren’t coming down anytime soon.
( 02: twenty two ):
And so where they were, “Hey, we’ll wait around until price’s equipment reduced, ” these people finally recognized they’re not really coming down, “I better make a move. ” Now, where that affected them negatively is these people were waiting, it put them behind the particular queue of getting equipment, this put them behind the queue associated with prices increasing. So that is kind of a trend all of us had seen over the past year or two, maybe even a year and a half, that people just hesitated, “Hey, it’s coming down, inch and then finally realizing it can not decreasing. “Maybe I need to make the particular move right now. ”
Bryan Furnace ( 02: 57 ):
It is fascinating you say that. Through my contacts in the dirt industry, I’ve known there’s the lot of people in that boat, that they will waited too long, increases happened. They also waited too long while they were humming and hawing regarding everything. And now you’ve obtained a 18 month lead time on a skid steer. But it’s been interesting, there were a very, very select number of guys who had just at the last minute ordered their own equipment. It was on about a six month lead. And so by the time the new equipment came in, that was about the time the particular used marketplace went up. So they actually made money selling their particular used machine, after which turned around and were able to get into a machine in a reasonable amount of time, and actually prior to the price increases got crazy high. So there’s been some interesting dynamics that have played out in this market.
Whilst gary Evonsion ( goal: 39 ):
Now, that is very true. Something you mentioned just then, maybe something to highlight, we do finance devices, both brand new and utilized, and we all also can financing people who are private party sellers. So like in that situation you just mentioned, let’s say they bought equipment and it wasn’t financing, it was just purchased. They just bought it, plus then they decided, used it a while and said, “Okay, I’m going to sell it. inches We can fund their sale to another party. So we call that personal party funding. So simply something in order to keep in mind for people viewing the video that we can be helpful within that way.
Bryan Furnace ( 04: 13 ):
Yeah, absolutely. I think the lot associated with guys don’t realize that there’s more than just the local credit union when it comes to finance options for private sale.
Gary Evonsion ( 04: 21 ):
Yes.
Bryan Heater ( 04: 21 ):
So gowns really great information.
( 05: 53 ):
What is Area 179 and how does this impact contractors as they proceed to purchase a piece of equipment?
Whilst gary Evonsion ( 05: 59 ):
Section 179 is part associated with the federal tax code where, think of it this way, someone buys capital apparatus, they normally depreciate it over five, seven, x years. Instead of doing that will, if you’re a small medium size company, you can take the depreciation immediately. Why which is really a nice benefit with regard to contractors away there is if, one, they may profitable and, two, they can get the particular equipment delivered and operational by the end of that tax year, they could write that off their bottom line, which basically accelerates that will depreciation. So instead of finding the benefit over 5 years, these people get the immediate advantage, which is a larger benefit.
( 06: 36 ):
Plus if you think about it, putting our financing hat upon, if they will finance that purchase, say right now, or even in the next 30 days, they might make three, maybe four payments to their funding company this particular year. But the write off of that machines might really save all of them more cash that they wouldn’t have to send out to the government and also goes can go towards individuals payments. And while they have the equipment, could possibly be using it, so they’re generating income off the equipment and these kinds of are using the taxes laws in order to help type of pay regarding that gear. So it’s kind of an exciting thing to be done and we see this done all the time for smart, savvy business people.
Bryan Furnace ( 07: 17 ):
And just to kind of break it down plus make sure I understand this correctly, We could see an example of using this. We’ve experienced this really big fat economy that will everyone is usually also growing fat away of. Therefore someone’s had a really tremendous year this year and these people going to possess to pay a lot in taxes. But at the same time, jooxie is also heading into a recession. No one’s really certain how profitable they’re going to be next year. Instead of taking my depreciation and writing it off over the particular next couple years with this big unknown of how much cash I’m heading to make, I could take that full devaluation this season and use it against the tax liability for this yr, which method I’m safe and I know I’m covered.
Gary Evonsion ( 07: fifty two ):
Yep. Yep. Basically.
Bryan Furnace ( ’07: 54 ):
Perfect. Okay. So that is a very valuable tool for business owners that know how to use this.
Gary Evonsion ( 07: 59 ):
Yep. Because you understand made a really nice point. They have got type of certainty of exactly where they stand today. Well, parenthetically as they get in towards the end associated with the season, but they’ll know, “Hey, I’m lucrative. ” And so it’s a great assurance that, “Hey, I can use the tax write away from. ”
Bryan Furnace ( ’08: 15 ):
And you’re getting the full benefit. Right?
Gary Evonsion ( 08: 18 ):
Yes.
Bryan Furnace ( 08: 18 ):
Gotcha.
( ’08: 19 ):
My final question to you are, are there any other type of best practices you would recommend intended for contractors looking to buy a piece of products? Section 179 is a perfect instance of something that if I am not aware from it, I actually may never take advantage of it. Anything else that kind of sticks out to a person along those lines?
Whilst gary Evonsion ( 08: 35 ):
Yeah. I would state that first thing is, and this’ll sound pretty basic, yet determine if you need that will equipment, and if you need it to get the long term, is actually get this. But move quickly to lock in the particular price of the gear due to the fact, as we’ve all observed, equipment keeps continuing in order to go upward, and so lock in the price of the tools. We such as to think it’s really good for businesses and company owners at this stage in the economy to keep a great deal of dry powder, which means keep financial flexibility, meaning use that asset to get capital inside, and that will means absolutely by financing it. That financial flexibility going into exactly what we may be going straight into over the following couple years is going to be critical for almost all business owners. And then once they decide to do that, move quickly around the funding side as well, to make sure they can get the terms they want. That type of thing.
( 09: 28 ):
Sometimes we hear from individuals, “Oh, I should have done this six months ago. I should have done it three months back. ” Sure, that’s great, but you still haven’t lost out since within the next month, 3 months, 6 months, prices most likely are going to carry on to increase. So avoid look back again, look forward. And if you do both of those things, the device locking in a lower price compared to it can happen plus locking in integers rate now versus it going up, each those will give them the competitive advantage of people who, Bryan, place their head within the sand and don’t do anything.
Bryan Furnace ( 10: 06 ):
Yes. Yeah.
Gary Evonsion ( ten: 08 ):
The particular final thing… Well, in fact two points because Area 179 was going to be the particular final point. So yep, that’s crucial to take that will. And a lot of people say, “Hey, I know about that, ” like a person did. “Hey, I understand regarding it. I didn’t know it was called Section 179, inch but know about this, take benefit of it.
( 10: 27 ):
And after that the final thing is have a good discussion with the vendor who’s selling you the equipment and make sure they are usually on the same page with you associated with expectations pertaining to delivery. Right now, no one can guarantee anything, but it’s good to know, plus we see this where an end user, a contractor says they just didn’t lock in or didn’t understand when delivery was going to happen. And discover out, is it eight weeks? Is this six weeks? Is it 6 months? Is it eight months? Is it, like you pointed out, 18 weeks? But realize that mainly because that’s the critical piece that you want to kind of nail down, and you may need to look around to find someone that can deliver it within the period that you want this. So I’d say those are best practices.
Bryan Furnace ( eleven: 12 ):
Yeah, I was heading to declare sounds like, especially in the devices market that we’re in, for you to actually do an adequate job in cash flow management, a person do really need to lock within realistically, are we three months out there, or are usually we six months out, or are we 10 a few months out?
Whilst gary Evonsion ( 11: 26 ):
Exactly.
Bryan Heater ( 11: twenty-seven ):
Well, Gary, thank you so much for all the information. This has been great.
Whilst gary Evonsion ( eleven: 29 ):
Thank you, Bryan. Thank a person for getting me.
Bryan Furnace ( 11: 31 ):
Good, thank you again in order to Gary arriving on the show to give all of us a little knowledge plus wisdom on how in order to go about financing some apparatus that isn’t just likely to end up being a giant brick of debt. It can something that will actually help your own company and help a person from a cash flow management standpoint. So as always, I hope this has been helpful. We appreciate you men watching. We’ll catch you within the next episode associated with The Grime.