As we approach the end of the year, you may be closing out, or have already exhausted, your capital expenditure budget. But that doesn’t mean you can’t get the packaging equipment you need before the close of 2019. Here are four ways to upgrade your production capacity now without having to wait until next year.
Traditional purchase. You can buy equipment for 50% down and 40% when we ship it to you, with the balance due in 30 days.
Lease. A typical lease runs three, four, or five years with a fair market buyout at the end of the term.
Build the equipment cost into your material purchases. This option is unconventional yet can be effective. Here’s how it works. If you buy a machine from Summit and agree to make material orders through us for a set period of time, we can spread your equipment payments out and roll them into the cost of your material plus interest. This equipment cost deferment is especially helpful when your capital expenditure budget is limited because it places the cost within your materials budget instead.
Rent. A typical monthly rental cost is based on the total purchase price and length of the rental terms. The benefit of renting is that you can quickly get the equipment you need on your warehouse floor to boost your production as needed. The downside is that not all equipment may be available for rental at all times. So give us a call at 253-858-4040 to ask about our current availability.
Take the Section 179 Deduction
When you invest in automation, you qualify for a Section 179 deduction, which is an equipment write-off that has been extended through 2019 as part of the Tax Cuts and Jobs Act. Deduction details are as follows:
- Deduct up to $1 million in equipment with a limit on purchases up to $2.5 million.
- Deduction covers such equipment as roofs, HVAC units, fire protection, alarm and security systems, and select computer software.
- It applies to used and new equipment.
- Bonus Depreciation has been expanded to 100% through 2023.
To illustrate the potential tax savings under a Section 179 deduction, see the example below, which was supplied by our preferred leasing vendor Falcon Financial Services:
Initial Equipment Cost $75,000
First Year Write-offs:
- Section 179 deduction $75,000
- Bonus depreciation (100% after Section 179 +$0.00
- Annual standard depreciation of 20% for years 1-5 +$0.00
Total deduction in first year $75,000
Tax savings (assuming 35% tax bracket) -$26,250
Bottom line equipment cost $48,750
To discuss other creative ways to get the equipment you need, call 253-858-4040 to chat with one of our experts. We’re here to help.
