The construction machinery market generates well over $100 billion each year. A large part of this market revolves around the leasing of construction equipment. Due to the tremendous cost of construction machinery, even the largest of companies tend to lease construction machinery when building new, or adding on to existing, facilities. Furthermore, as technology continues to improve, operational equipment that is essential for business can be rendered useless in short periods of time; as a result, companies tend to avoid potential losses by leasing expensive technological equipment.

Equipment Leasing Programs, also known as Equipment Leasing Partnerships, allow investors to enter into these incredibly profitable marketplaces. In these programs, investors pool their capital to buy equipment and become lessors. Once an investor enters into one of these programs, they receive an interest in future rent payments for use of the equipment, and the equipment asset itself.

What Makes Equipment Leasing Programs Appealing?

For one thing, equipment leasing programs can provide large returns that can often be tax-deferred throughout the life of the equipment, or the life of the partnership. Just because companies choose to lease the equipment does not mean it comes cheap. Think of a company like UHaul, which is run similar to an equipment leasing program. Over time, singular pieces of equipment, such as moving fans, can generate revenue that grossly exceeds the purchase price of said equipment.

Where is the Risk?

As we’ve discussed, certain products, especially technology, can quickly become obsolete. The risk in those products lies in the possibility that the product becomes obsolete before the leasing revenue exceeds the purchase price. Additionally, the ability to lease products like construction machinery is dependent upon a market for said products. If the market is slumping or is over-saturated, then there will be no return on your investment. Becoming involved in an equipment leasing program is an illiquid investment, so an interest cannot be sold quickly when market failures appear imminent.

Brokers Must Match Investors to Investments

If you found all that hard to grasp, you’re not alone. However, it is not the duty of retail investors to fully understand the complex products contained in their portfolios. After all, you are probably a novice when it comes to complex financial matters. Your financial advisor, on the other hand, must not only understand the product he or she is selling to you, but he or she must also ensure there is a clear suitability match between you as an investor and the investments in your accounts. Certain securities are not for everyone.

Pennsylvania & New Jersey Securities Litigation Law Firm

Name *

If you or someone you know has suffered financial loss due to complex securities or any other form of investment fraud or broker misconduct, please contact our experienced team of securities attorneys immediately to protect your legal rights by calling 1-855-462-3330 or by using our online contact form.