How Much Are Monthly Payments for Excavator Financing?

You are in the construction business and in need of an excavator. You are evaluating if you should purchase or lease an excavator. How do you go about financing? What would your monthly payments be should you choose to go ahead with purchasing or leasing an excavator?

Believe me, you are not alone! A lot of construction companies have the exact same questions when it comes to excavator purchasing or leasing and are trying to figure out how to go about it.

In order to make the right decision for your business, it helps to ask yourself a few basic questions about your business and the projects or goals you want to tackle. Answering these questions would help you objectively determine which option would work best for you. Are you ready to find out?

Excavator Financing Questions

All business owners like yourself know better than diving right into a purchase or lease without looking over all the perspectives, benefits, costs, etc.

Before you dive into getting an excavator lease or buying new or used excavators, ask yourself these questions, which will help you to zero in on the best strategy for acquiring and using an excavator, which will determine the final cost per month of owning or using it.

Excavator Usage

How often do you need to use the excavator? If you only have to use it on occasion, buying or leasing may not be a wise choice. A better option would be to rent the excavator only when you need it. This is a viable option if you don’t plan on using it very often. However for construction companies like yours, you probably need to use it pretty often - in that case, you’ll probably want to own or lease the excavator.

New Vs. Used Excavators

Can you make do with a used excavator or do you need a new one? Excavators are one of the most expensive construction equipment. No different than any other kind of product or service, price tags on excavators vary based on the size (mini, small, mid-size, and full-size), power, and features available.

Keep in mind that the base price does not include accessories that you might need. The base price typically includes one standard bucket. If you need more than one bucket and / or buckets in different sizes, then you need to add the additional costs involved.

Do you need any powered attachments like rakes, hammers, grapples, etc.? Think through every excavator accessory you might need for your business.

The total price tag keeps getting bigger as you consider the required accessories.

Do you need a “new” excavator or can you make to with used equipment? Going the used route can help you to save more money in the long run.

Excavator Cash Purchase

Do you have the capital on hand to make an outright excavator cash purchase? If you can afford to buy your excavator right on the spot, then that will generally be a better option for you. Excavators that are well maintained could last for decades without any issues and meet your construction needs. It is not a piece of capital equipment that you would buy often.

You don’t need to worry about paying interest, but not all companies have that kind of cash laying around.

If you don’t, there’s no need to worry. You can still get excavator leasing!

Excavator Financing Cost

When your business is new or you don’t want to sink all of your surplus cash into equipment, excavator leasing is a great first option.

This will allow you to spread out the excavator cost over a series of months, depending on how long your agreement with your financier is.

Of course, figuring out the exact cost of excavator financing isn’t easy to figure out just by reading an article. Each business, like yours, is unique and financiers can set up unique payment models to suit your business.

However, we can help you get an idea of the general costs you might expect. Excavator price ranges from around ~$20K (mini-excavator) to ~$300K (full size excavator).

If you know what you can afford to spend every month on an excavator than you can back into how expensive of an excavator you can afford to lease for your business. Here's a handy excavator equipment lease calculator.

How expensive of an excavator can I afford to lease? Using an equipment lease calculator.

Let’s use an example scenario using a $25K loan. Below are the estimated monthly loan payments you could expect if your business has good-to-great credit:

24 months (2 years) -- $1,250 to $1,350 per month
36 months (3 years) -- $850 to $975 per month
48 months (4 years) -- $650 to $775 per month
60 months (5 years) -- $525 to $625 per month

As you can see, the longer the loan term, the cheaper it gets per month. This might be an attractive option for a new business, but keep in mind that the total money you will spend on your excavator will go up the longer your term is. In general, the shorter term your budget can afford, the better.

In the above scenario, if you chose to lease the excavator instead of purchasing it, then you could expect slightly lower monthly lease payments given that the excavator would have a residual value at the end of the lease term.

The exact amount that your monthly payment will be is dependent on these major factors:

Length of lease term
Cost of the excavator and associated accessories
You (or your business) credit score.
Number of years you have been in business.

The better your credit and / or business financials are, the lower a lender is willing to make your payments. Regardless of how much your monthly payments are, simply keep in mind the opportunities that having an excavator will provide. Even if your monthly payments seem to be high at first, you are likely to be turning up a profit due to your ability to take on larger and more ambitious projects that you couldn’t have without it.

In the end, remember what your goal is - getting an excavator for your business. As long as your payments are reasonable, it doesn’t matter if you’re paying on the higher end of the spectrum or not. You’ll get access to an excavator and can complete jobs for clients much faster and more efficiently.

Here's a resourceful excavator finance calculator tool to see what your excavator financing payments could be. Also includes an amortization schedule for your accountant. Use this amortization schedule to give to your accountant during business tax season to help him decide the best way for you to get the best tax write offs now and in the future to lower your taxable income.