Golf Course Management

JUL 2014

Golf Course Management magazine is dedicated to advancing the golf course superintendent profession and helping GCSAA members achieve career success.

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60 GOLF COURSE MANAGEMENT 07.14 fexibility to incorporate all the equipment you require to maintain your course your way. Ask for extended-term warranty pack - ages, which can be easy to include in the total fnance package and will allow the cost of this service to be included in your monthly payment. New or used? Consider used or certifed pre-owned equipment. Today's turf maintenance equip - ment and utility vehicles are made better than products produced even a few years ago. This is good news for managers whose budget con - straints may require the acquisition of all, or a portion of their 2014 purchases, to be used or certifed pre-owned. Used or certifed pre- owned can be a great ft for backup equipment or equipment that is used only a few hours each month, since they are subjected to limited wear and tear. High-quality used equipment is readily available in the marketplace with numerous reputable vendors specializing in this mar - ket segment. Used equipment runs the gamut of condition, from fresh off another golf course with no refurbishment, to a complete frame-up restoration. Leasing has become an increasingly pop- ular and affordable alternative to loans and full payout contracts over the past several years. As organizations have become less focused on ownership and more interested in the use of equipment, leasing has piqued their interest. Many organizations have come to realize that ownership of depreciating as- sets is not in their best interest. Leasing of- fers several advantages to full payout fnance contracts, including: • Improved cash fow. You'll have lower monthly payments by incorporating resid- uals (an amount the lessor assumes the equipment will be worth at lease termi- nation). With leasing you pay for only the portion of the asset you use. • Lower maintenance costs. Warranties usually accompany new equipment acqui- sitions. Maintenance costs on older assets are often higher than on new equipment, thus maintenance budgets can be reduced when new equipment is acquired. • Accounting benefts. Many leases qualify for off-balance-sheet treatment, which improves fnancial ratios. Improved fnancial ratios can lead to better access to credit and more favor- able lending terms. • 100 percent fnancing. In most instances, lessors fnance 100 percent of the equip- ment cost, including dealer setup charges, taxes and freight. Available cash can be used for more productive purposes such as club improvements or taking discounts for upfront payment from suppliers. • Administration. Leasing allows for the con- solidation of many services into one transac- tion. Maintenance packages and insurance can be added, requiring only one monthly payment for all aspects of equipment usage. • No risk of obsolescence. Technology has led to many recent product breakthroughs, and this trend will likely continue. Why take ownership of an asset that may become obsolete? Since the equipment is owned by the lessor, the risk of obsolescence is transferred to them instead. • Repayment terms can match seasonal revenue streams. Repayment terms can be tailored to match seasonal revenue. Skipped or reduced payments can be in- corporated into the lease stream to refect non-revenue periods. • Economical fxed-rate fnancing. The stream of fxed-rate lease payments will not increase, as they are guaranteed for the life of the lease. The lessor assumes the risk of interest rate fuctuations, mak- ing it easier to plan budgets. — B.L. It is important to determine if original man- ufacturer's parts and factory trained techni- cians were used to complete any refurbishment. Most major manufacturers of turf equipment and larger independent equipment distributors refurbish used equipment and provide a thor - ough accounting of the refurbish process and often extend a warranty. It is worth the effort to have your mechanic or other trained profes - sional inspect the used products to be certain the asset will function properly on your course. With the improvement in the quality of turf maintenance equipment, fnance com - panies are willing to offer longer lease or loan terms on used or certifed pre-owned equip - ment. The combination of longer fnance terms and the lower cost of acquisition make acquiring equipment on your wish list much more affordable. Additionally, if you want to include an extended warranty in the fnancing package, most lenders will accommodate the addition of a service agreement. Do the math Weigh the cost of maintenance against your monthly outlay for new equipment. Eco - nomic necessity may require the reduction of your equipment budget to accommodate other course priorities. If this is your situation in 2014, closely examine your equipment main - tenance budget. Older, worn-out equipment has a signif - cantly higher cost to maintain than is often an- ticipated. Take into account that over a season, repairs, parts, labor (including overtime) and equipment downtime will all have a cost. So while it may seem cheaper in the short term, older equipment can have an economic as well as an intangible impact on your golf course. Why a lease? 056-061_July14_Equip.indd 60 6/17/14 2:30 PM

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