Making the decision to buy your own plant, as opposed to leasing it, can be a difficult process. Below we will discuss factors to consider when you’re deciding between buying or leasing your own plant!
Taking delivery of a brand new piece of machinery feels good, doesn’t it? That shiny new water truck, service rig or vacuum machine represents all the effort you’ve put into building up your business, vying for contracts, and working hard to keep your clients happy. The plastic-covered seats, the “new car smell”, and the odometer numbers down there in three or even two digits: now that’s a good feeling!
But is buying new gear really the best option? Depending on the size of your business, the prevailing economic climate, and the type and number of contracts you have ahead of you, it may make more sense to lease some or all of your plant.
So let’s take a look at the pros and cons of both leasing and buying your gear.
To Buy or not to Buy, That is the Question.
According to the Australian Government’s business website, if you are choosing whether to buy or lease plant or equipment you need to “consider what your business needs are and your finances.”
Lessing requires less financial input
Leasing essentially means that you are borrowing your plant under a contract. This requires less commitment than purchasing outright, and makes it simple to upgrade your equipment as new models become available, your work contract comes to a successful conclusion, or when the lease simply runs out.
Buying gives you more control
Being able to adapt or customize plant is an important consideration if you have contracts that require specific attributes that a standard machine doesn’t have. If you own the machine, you are free to adapt or alter it as you please (within safe operating parameters, of course) and this is usually not possible with leased equipment. You’ll also be able to claim depreciation on the equipment and have the option to sell or trade it for new plant in the future.
The Pros and Cons of Leasing
There’s no doubt that leasing can be a beneficial option in some cases. Indeed, adding a few leased machines to the fleet that you own may be an effective solution to some situations where a job needs extra equipment at short notice. But leasing has a few downsides as well, so let us consider its pros and cons.
The benefits of leasing
Leasing plant has a number of benefits, especially for small businesses with lots of upcoming work but a lack of available capital. These benefits include:
- Budgeting is easier. Spreading payments out on a monthly basis makes it easier to run a smooth company budget without having to come up with lots of cash up front for a new machine. You may also be able to claim tax rebates on leased equipment…accountants love that!
- On-site flexibility. If a piece of leased equipment doesn’t meet the job requirements it’s easy to get it replaced with something that does. You can also use a leasing option to test-drive (so to speak) a piece of equipment to make sure that if you were to buy one later on, it would be right for your work situation.
- Servicing and repairs. Most plant leasing contracts include repairs and maintenance as part of the lease.
- Rapid updating to new models. These days, machinery gets obsolete pretty quickly. Leasing allows you to upgrade to new models as they become available.
The downside of leasing
Leasing plant may not be the best option for your business. Here’s why:
- It may cost you more. Paying for the long-term lease of a piece of plant may end up costing more over time than the machine was worth in the first place.
- Lease terms can be constrictive. If your job contract gets extended or held up, adding extra time to a piece of plant’s lease can be extortionately expensive.
- Brand availability can be diminished. You’ll know exactly what you want and what you want it for. But a plant leasing company may not have exactly the right bit of kit for your requirements.
The Benefits of Buying.
Apart from the “new car smell” thing, owning plant has quite a few positives. But there are also a few pitfalls that you need to consider before handing over the cash for a gleaming new machine.
If you own it, you can do what you like with it. You also won’t be limited by what a lease company has in stock at the time. So if you like the look of a particular brand or model you can order it, put your company livery on it, then stand back and gaze lovingly at a machine that you actually own.
Get it fixed sharpish!
Time is money on the job. So when things break down, or need to be serviced, you don’t want to be hanging around waiting for a lease company’s service team to get off their arses and get to your job site. Owning your machinery means that you can schedule maintenance to suit your workload and have staff on hand to fix breakdowns as soon as they happen.
With no lease contracts to monitor, your office staff can get on with the more important work, such as billing your clients and organising the Friday drinks.
But what about the cons of plant ownership?
There are, of course a few downsides to plant ownership such as:
- Payment up front. Having cash on hand to pay for capital investment in plant and equipment can be a problem, especially if you’re just starting out.
- The cost of maintenance. Even though it may take time for a leased machine to be serviced or repaired, the cost of this is usually covered in the lease deal.
- Updating can be a problem. It’s a known fact that as soon as you drive a new bit of kit out of the dealer’s yard, a newer and flashier model turns up! Leasing can be a great way to keep your fleet up to date with the latest models.
STG Global is Here to Help.
At STG Global we understand that it can be a tough decision to outlay a lot of coin on a new machine. But we also know that our gear is built to ensure that you get extremely good value for your hard-earned money. Not only that, we can make sure that the piece of plant that your buy from us has all of the features you need to do the job efficiently, safely and profitably.
So if you think that buying a new piece of plant from us is a better option than leasing it from some third party company, get in touch. We’ll do our very best to get you into a brand new machine that is perfect for your needs.
Tell you what…we’ll also chuck in the new car smell and plastic seat coverings for nothing!