When you need an excavator, bulldozer, or crane, the first question is usually: buy or lease?
Most contractors focus on the monthly payment. But the real cost goes way beyond that number.
Buying has hidden expenses that add up fast. Leasing has trade-offs too. Understanding both helps you make the right call for your business.
Here’s what most contractors overlook when comparing the two.
The True Cost of Buying Equipment
Buying seems straightforward. You pay upfront, own the machine, and use it as long as it lasts. But ownership comes with ongoing costs that many contractors underestimate.
- Depreciation
The moment you drive a new excavator off the lot, it loses value. Heavy equipment depreciates fast, especially in the first few years. A $200,000 machine might be worth $120,000 after three years.
That’s $80,000 in value gone, even if the equipment still works perfectly.
If you ever need to sell or trade it in, you’re taking a loss. And if you financed the purchase, you might owe more than the equipment is worth.
- Maintenance and Repairs
You own it, you fix it. Oil changes, hydraulic repairs, tire replacements, and engine work add up. Older equipment breaks down more often, and parts get expensive.
Budget 10 to 15% of the purchase price annually for maintenance once the warranty expires. For a $150,000 excavator, that’s $15,000 to $22,500 per year.
And that’s assuming nothing major goes wrong. A blown engine or transmission failure can cost $30,000 or more.
- Insurance
Lenders require full coverage if you finance the purchase. Even if you pay cash, insuring a $300,000 crane isn’t cheap. Expect $3,000 to $10,000 per year depending on the equipment and your coverage.
Liability insurance, theft protection, and damage coverage all add to the bill.
- Storage and Transport
Where do you keep a bulldozer when it’s not on site? Storage yards, secure lots, and transport between job sites all cost money. For contractors without a dedicated yard, this becomes a recurring headache.
Transporting heavy equipment can run $500 to $2,000 per move, depending on distance and machinery size.
- Opportunity Cost
The biggest hidden cost? Tying up capital that could be used elsewhere. A $150,000 excavator purchase means $150,000 you can’t spend on payroll, marketing, or bidding on new projects.
That cash could have gone toward hiring another crew, expanding your service area, or covering slow months. Once it’s locked in equipment, it’s gone.
The True Cost of Leasing Equipment
Leasing looks more expensive on paper because you’re making payments without building equity. But the total cost picture is more nuanced.
- No Depreciation Risk
You’re not losing value on an asset you don’t own. When technology changes or the equipment gets outdated, you return it and upgrade. No resale headaches, no loss on the books.
- Predictable Monthly Costs
Lease payments are fixed. You know exactly what you’re paying every month, which makes budgeting easier. Some leases even include maintenance, further stabilizing costs.
No surprise repair bills. No sudden breakdowns eating into your profit margin.
- Tax Benefits
In Canada, lease payments are often fully deductible as business expenses. Buying lets you claim depreciation (CCA), but that’s spread over several years. Leasing gives you the deduction upfront.
Talk to your accountant, but for many contractors, the tax treatment of leasing is more favorable.
- No Long-Term Commitment
Projects change. Equipment needs evolve. Leasing gives you flexibility to adjust your fleet without being stuck with machinery you no longer need.
Need a crane for six months? Lease it. Done with the project? Return it. No trying to sell a $400,000 asset in a slow market.
Beyond comparing monthly payments, contractors need to understand lease structures, tax implications, and maintenance responsibilities. To see a complete breakdown of rates, terms, and what to expect, explore the different leasing options for construction equipment.
Real-World Example: Excavator Over 5 Years
Let’s compare a $150,000 excavator over five years.
Buying:
Purchase price: $150,000
Financing cost (6% interest): $18,000
Maintenance (years 3 to 5): $15,000
Insurance (5 years): $20,000
Depreciation loss: $60,000
Total cost: $263,000
Leasing:
Monthly payment: $3,200
Total payments (60 months): $192,000
Maintenance: Included in lease
Insurance: Included in lease
Depreciation: Not your problem
Total cost: $192,000
In this scenario, leasing saves $71,000 over five years and keeps your capital free for other priorities.
Which Option is Right for You?
It depends on how you use the equipment and how long you need it.
Buy if you’re using it daily for 10+ years and have the cash to invest. Lease if you need flexibility, want predictable costs, and prefer to keep capital available for growth.
The key is looking beyond the monthly payment and understanding the total cost of ownership. Both options work. The wrong choice is making a decision without knowing the full picture.
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