Year-End is the Time to Buy New Equipment
End of Year Promotions
At the end of the year, equipment dealers are motivated to reduce their inventory and make room for new models. This often means running special promotions to help lower the total acquisition cost of new machines. The promotions usually begin in late fall and continue throughout December. This gives you ample time to assess your business needs and research promotional options. Some offers that may be available include:
- Low interest rates
- No payments due until spring
- Little or no down payment
- Low monthly payment leasing options
In addition to the opportunity to get a great deal on a new piece of equipment, buying at year-end can also have considerable tax advantages. Tax deductions can help reduce your company’s tax liability, which saves money you would otherwise have to pay to the Internal Revenue Service as income tax. For the dollars you spend to grow or improve your fleet, you receive some savings on your potential tax liability in the form of a deduction.
Additional savings may come from asset depreciation, which is how the value of your equipment fleet is managed from a tax perspective. Designed in part to promote reinvestment of operating cash back into your business, it can potentially reduce your taxable income for that year. In recent years, other tax incentives such as bonus depreciation have been put in place to allow for equipment purchases to receive additional depreciation in the first year.
For small businesses purchasing new machines, Section 179 of the tax code may offer additional incentives. Rather than just depreciate a new asset year-by-year, this deduction allows you to write off up to $25,000. This can save you more money by offering an even larger reduction of your income tax liability.
Please note: There are some limitations and considerations to be aware of regarding Section 179 and bonus depreciation. It is always best to consult your tax accountant prior to making a business decision based on these items.
Be Prepared for 2016
Investing in your fleet at the end of the year can help put returns earned over the previous 12 months to good use and position your company for success in 2016. This is a great time of year to assess which pieces in your fleet currently require or could potentially need significant repairs or replacement soon. This will help you decide whether you want to update your fleet at year-end or handle potential service or replacement costs down the road.
In addition, it’s a good idea to review your business’s current needs and anticipate what might be required in the near future. That might mean replacing older equipment with new machines that are a better fit for what’s coming next. By doing this, you are undoubtedly making an investment that will help you prepare for expanding business opportunities in the new year.