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Equipment Investments... Purchase or Lease?

Weighing your investment for the long term
Weighing your investment for the long term

Before you purchase or lease any major unit of equipment, justifying the decision comes with some head scrathing and pencil pushing.  Determining the overall cost(s) by the usage or potential further usage can give you some forecast of the cost variable of your decision.  

Many major contractors (including the one I work for) rent or lease equipment quite often to fill a particular immediate, but temporary need.  Your financial forecast and future growth in a particular niche or your business has a great bearing on whether to purchase equipment, or go the route of leasing what you need.  Projected time of usage of a project versus continued use for other projects or applications.  

To perform this analysis you need to collect and compare information on the old machine versus a new one. Factors to be considered include:

  • Cost of new vs. leasing
  • Tax Benefits (deductions/depreciation)
  • Operating costs per hour, based on the projected life cycle (or hours of use)
  • Other factors, such as projected repairs and down time

The allocation of cash assets for the purchase or lease of equipment is best guided by adhearing to the company’s long and short term business plan.

A thorough analysis of equipment costs requires consideration of life cycle costs based on the projected life of the unit. To make cost-effective purchases, you need to list expected costs in a projected life cycle of the item.

A major factor in the annual usage schedule of some types of equipment is climate. In some regions, the growing season and therefore earth work may last for nearly an entire year, while in other locations snow removal equipment may be all that is needed in winter months where digging is limited due to the colder climate and conditions.

Due dilligence is your ally.  Weight the options to make the best decision for you and your business...

 

TAGS     new equipment,  lease equipment
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