Running a construction business entails having heavy equipment always at the ready if clients need any of it. Deciding on buying a piece of heavy machinery is a decision that business owners must think about carefully. A piece of heavy equipment costs thousands of pounds, and if not used frequently, the company may incur losses on its purchase. There is a general rule of thumb among construction companies. If you don’t use specific machinery for 60% to 70% of the time, it is best to lease or contact a plant hire Birmingham company to rent the said equipment. Here are other considerations.
Analysis of equipment needs
Remember the 60% – 70% general rule of thumb. If your company uses specific equipment more than this threshold, then buying is a good move. However, if the use of the machine is less than the threshold, renting or leasing it will be more beneficial to the business. In renting a machine, you don’t have to shell out the total cost of the machine upfront. But if the rental fees total more than the purchase cost, then it’s time to buy. The versatility of the equipment should also come into play. If it performs multiple jobs on different construction sites, then buying it will be better.
Tax incentives and capital expenditure
Rental costs are either deducted by the company as a business expense at the end of the year or billed to the customer. Purchasing equipment is capital expenditure. You cannot take away its cost for the entire year when you purchase something. With this said, renting or leasing will be the way to go.
Heavy equipment manufacturers offer attractive deals to construction companies to make it easier for them to acquire the needed pieces of equipment. Some even offer low-interest rates on financing to lure buyers into purchasing heavy equipment. Some offer zero interest rates on financing for particular payment periods.
Appreciation and depreciation value
Before buying, research different makes and models of the same type. Some hold their value much better than their competitors and can be worth more money when you decide to sell it a few years on. If you are fond of switching up equipment for the improvement of your services, picking the right equipment based on its yearly depreciation may benefit you.
If you land a contract several hundred miles from your base, will it be cost-efficient to buy the specific equipment and transport it to the job site? Or will it benefit the business more if you hire from a reputable forklift hire company near the job site? In transporting heavy machinery, you must factor in the loading and unloading time, driver fees, and diesel expenses.
If your construction business does not only involve servicing clients but managing your own fleet as well – then buying is good for the company. If you have ample storage space and maintenance personnel to make sure each piece of equipment goes through routine maintenance, you can buy a fleet of heavy equipment items; otherwise, renting or leasing is your best option.