Construction Equipment Purchase Tips

Although construction equipment can vary from relatively small right up to vast pieces of machinery, on the whole, the cost of purchasing such items is typically high.

What this means for many companies, is that they are looking for innovative solutions for funding construction equipment. That’s to try and offset, in part, the high capital costs involved.

Outright purchase

If your company is relatively cash-rich, purchasing something outright might be a viable option.

The pros and cons of this approach are relatively straightforward. It is worth keeping in mind though that tying up significant amounts of your capital in assets may be a questionable strategy if it might reduce your ability to cope with emergency funding requirements in other areas.

Hire purchase

This is a very familiar mechanism for funding construction equipment acquisitions. It also has the huge advantage of being relatively simple to understand and operate.

You will typically need to find a proportion of the purchase cost yourself by way of the familiar “deposit”. The rest of the funding may be available from the lender who will purchase the equipment and allow you to use it as you repay the sum advanced over a period of time.

The machine finally becomes yours in terms of legal ownership once you have made your final repayment.

Operating lease

This might be a particularly attractive way of funding construction equipment in situations where you have no desire to ultimately own the item or necessarily to use it over longer-term time periods.

An operating lease gives you access to the equipment in return for periodic payments to the company who owns it. They’re effectively letting you use their equipment in return for your payments. Those costs can be taken into your standard accounting as an allowable business expense.

The equipment may be treated as off Balance Sheet subject to your Auditors approval – something that might also be attractive to you in certain situations.

Finance lease

Here the lease is written on the basis of covering the entire cost of the equipment (more or less) over the period of the lease.

It offers certain accounting attractions that may or may not be applicable in your particular circumstances.

Purchasing second-hand construction equipment

Whatever method of financing you find attractive, you may also understandably, be looking towards the pre-used marketplace as part of your cost containment strategy.

There may be certain advantages in that but it may be worth keeping a few things in mind:

  • financing for pre-used equipment may sometimes be more complicated to find, depending upon the age and condition of the items concerned;
  • although not strictly speaking related to finance, it is worth being sure that you are not buying someone else’s problems. Much construction equipment and machinery is typically used under very demanding conditions and that can take its toll even on items that are only of a modest age. It’s worth being clear that you are buying excellent equipment, whether new or used.

Taking the next steps

At ACF Direct, we have unrivalled experience of funding construction equipment.

It’s worth noting that what might have been an ideal solution for another company might not be so for your organisation. Even if you have secured such funding in the past, the position of your company today might mean that a different funding approach would be preferable.

We’d therefore welcome the chance to discuss your requirements with you, in order to ascertain how we might be able to help.