Your Guide to Leasing & Buying Golf Course Maintenance Equipment
Replacing golf course maintenance equipment is a big decision for any club. Costs are high and the issues complex. Getting it right requires not only knowing your options, but also weighing them wisely. To help you navigate the process, we talked to Chris L. Schauerman, Senior Vice President of the Sports and Entertainment Group for PNC, a bank that specializes in golf course maintenance equipment financing solutions.
Chris speaks from experience, lots of it. And while he admits that all golf course maintenance equipment replacement decisions are driven by budget, needs and priorities, there are some guidelines you can follow to help make good choices along the way.
Consider the Advantages of Leasing vs. Buying Golf Course Equipment
Your first question may be whether to buy the golf course maintenance equipment outright or lease it. Buy the equipment and it’s a done deal — but it’s also a big capital expenditure. Leasing gives you more flexibility upfront, can allow you to acquire more and better equipment, and you can spread payments over several budget periods.
Leasing also creates a natural timeline for golf course maintenance equipment replacement; you simply replace as needed at the end of a lease term. For items such as golf cars and mowers, this makes sense as the more current your equipment, the better the experience for your players.
If you decide to lease, Chris strongly suggests going with a company with industry expertise. Why? Because a company focused on the golf industry understands your marketplace and the kind of golf course equipment you need. This makes the transaction much smoother and connects you with a partner who can proactively make recommendations that are best for the unique needs of your operation.
Choose the Type of Lease Wisely
The next question you may run up against is which type of lease to go with—fair market value or a dollar out/conditional sales contract (CSC)? Before you decide one or the other, consider the type of golf course equipment you’re looking to replace.
A fair market value lease is good for golf course maintenance equipment you might use regularly and frequently and then replace at the end of the lease term. Think mowers, blowers, golf carts and utility vehicles.
At the end of the lease, you can buy the piece of equipment for fair market value or the financing company will take ownership and sell it back to the manufacturer or to a reseller. Generally, courses opt to give back the equipment and engage in a new lease for new golf course maintenance equipment. This arrangement allows golf courses to affordably gain access to top-of-the-line equipment that produces great results as efficiently as possible. Another option is to extend the lease at the end of the term.
For longer-term-use golf course equipment, such as tractors, sprayers and aerification equipment, a CSC lease makes more sense. That’s because these are “lease-to-own” arrangements in which the ownership title transfers to you at the end of the lease. At that point, you can choose to keep the equipment or resell it. Longer-term golf course maintenance equipment that isn’t used as frequently (and is hopefully well maintained) often makes sense for courses to own over longer periods of time.
Be Smart About Lease Payment Structures
With either type of lease, there are several ways to structure your agreement. If you’re in a seasonal market, you might want to schedule seasonal payments, i.e., higher payments in the summer, none in the winter (or vice versa if you are in a Southern climate). You can also schedule lease payments based on frequency of use. All of this is negotiable—talk to your lender.
Review Your Priorities When Deciding New vs. Used Golf Course Equipment
The decision to go with used or new equipment is largely based on your golf course’s needs and budget, but there are some other considerations to take into account as well. Typically, lease arrangements are for new equipment, which offers you operational efficiency and better re-sale value should you decide to sell the equipment in the future.
However, used golf course maintenance equipment is currently holding its value and authorized manufacturers or their distributors can offer you some good options in the way of a leasing a package (as in several pieces of equipment) or an individual item.
Ultimately the decision depends on your needs. What golf course maintenance equipment you are using today paired with your current financial situation often drives this decision. If your course is operating with equipment that’s five to seven years old, opting to lease new equipment could be an advantage with added operational efficiency and consistent quality your club and players/members may want. If you’re not necessarily in the market for all the bells and whistles, leasing (or buying) used golf course equipment might be fine, particularly if your course is good at maintaining your equipment.
Review Costs, Long-Term Gains and Get Expert Help
Like anything in business, weighing your options in light of your needs, now and in the future, will give you confidence in your end decision. Consider the potential for improvement in your golf course and your players’ experience, research the costs and leasing options and make the choice that’s right for you.