Growing your construction business requires a significant investment, and it doesn’t stop there. Once you acquire equipment, you also have to worry about maintenance, security and keeping things running at their best. However, companies will likely make mistakes with how they handle these areas of investment.
This post will discuss some common blunders companies make when investing in construction equipment. But first, let’s go through your options when looking to acquire heavy construction machinery.
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Acquiring Construction Equipment: What are Your Options?
There are many options for acquiring the construction equipment you need. Some of these options include:
- Buying new or used equipment
- Taking out a loan to buy equipment
- Leasing construction equipment
- Renting equipment
Leasing is the most popular option among small businesses because it offers both flexibility and affordability. Leasing doesn’t require an up-front investment as much as buying does, while still giving your business total control over your equipment.
Mistakes to Avoid When Acquiring Construction Machinery
Construction equipment can range from excavators and tractors to forklifts and sweepers. Regardless of what you need, it’s important to avoid these common mistakes when trying to acquire it:
1. Buying old equipment or used equipment
It is important to understand when “new” equipment is actually “old” and when buying used equipment that you do your homework first. It is important to analyze whether or not purchasing something new will save you money in the long run rather than buying something which has already been used.
2. Not shopping around
It’s very important to compare rates, terms, and options before making a decision on equipment financing. Lenders often offer different rates and terms to customers with varying credit profiles.
Depending on your financial situation, you may qualify for better deals than if you went with a broker or a single bank loan. Always ask lenders about any discounts or specials they might be running before applying for a loan or lease so that you can get the best rate possible.
3. Trying to finance too much equipment
When trying to acquire machinery, it’s important not to go overboard with construction equipment funding products.
Overbuying can lead to higher monthly payments which will likely make it harder for your construction business to turn a profit in the long run. Only finance as much equipment as needed for your business operations at this time (plus some extra).
4. Not understanding the costs of equipment ownership.
While equipment ownership may seem like a way to save money, it often results in substantial costs in the long run. To ensure that you’re making a sound financial decision, make sure that you understand the total cost of ownership for your equipment in the time frame you need it.
Don’t just look at the purchase price or monthly payment; instead, consider all ownership costs including financing charges (if applicable), maintenance costs, storage costs and eventual resale value.
5. Not taking care of maintenance (or not knowing how).
After purchasing construction equipment, it’s important that you know how to take care of routine maintenance issues. Many companies try to skip out on these tasks in an effort to save time and money; however, this often ends up costing them more in the long run as they have more costly repairs down the road.
A simple Google search can help you determine what other people are paying for maintenance on specific models. You can also get this information directly from the manufacturer or dealer, who should be happy to help you with your decision based on their knowledge of your situation.
6. Forgetting about accessories and attachments.
Don’t forget about all the extra pieces that come with purchasing construction equipment, such as maintenance kits and service plans. These are often overlooked by those who are just trying to get their hands on a machine. In reality, when looking for used or new equipment for sale, it’s important to evaluate these accessories as well and see how they impact operational costs.
7. Failing to get financing pre-approved:
It’s easy to get caught up in the excitement of finding the perfect piece of equipment and forget about one of the most important aspects of acquiring new equipment—getting financing pre-approved.
Should You Rent or Lease Construction Equipment?
You have a construction project to complete, but you don’t want to buy new construction equipment. Should you rent or lease?
When deciding if you should rent or lease construction equipment, it’s important to understand how each option works. Here are a few key considerations for renting and leasing construction equipment.
Renting construction machinery
Renting is a good option if you only need the equipment for a short amount of time, such as a weekend or one-day project. Rental options vary from company to company, so ask about them before committing. For instance, some companies offer hourly, daily and weekly rentals while others may only offer one or two of these options.
Leasing construction equipment
If you want to keep the equipment for a long time or if you will use it frequently, leasing is typically a better choice than renting. The monthly rental fee is also frequently far greater than the monthly lease payment.
Another fact to consider is that by leasing, you will never create assets knowing that the equipment will not be yours.
If you decide to lease your equipment, it’s important to find out what kind of maintenance and repairs are included in the lease. Some companies offer full-service leases that include maintenance and repairs while others require that you pay for these services out of pocket.
When you acquire construction equipment it is always important to keep your transaction objective and mindful. By being mindful, you can avoid most of the mistakes discussed above.