Reduce the costs of equipment acquisition and upkeep

1. Reduce the costs of equipment acquisition and upkeep The most important thing that matters to construction equipment owners is the cost of owning the equipment. The primary objective of any business is to procure a piece of productive equipment and, at the same time, keep the operating costs low. The total cost of ownership of an asset over its life cycle is significant as it affects the profitability of the business and helps to determine the ROA (Return on Asset). You must know and understand the factors that go into deciding whether to buy or rent equipment.

2. The Total Cost of Ownership A Used Heavy Equipment cost is more than just its purchase price. The other expenses that go into owning the equipment during its ownership are the following: •Registration costs •Insurance •Maintenance cost •Depreciation •Repairs, spares, and replacement costs •Interest cost if the equipment is financed. •Cost of tires and tracks •Fuel cost •Driver/operator cost All the above costs add to the total cost of construction equipment ownership. How do you control or reduce the total cost of ownership? Businesses in the construction, infrastructure, or manufacturing sector can increase their profitability by managing their asset more prudently. The decision to purchase Used Construction Equipment in cash or lease rental will depend on the cash flow position of the firm. Construction equipment is expensive and requires substantial capital outflow when purchased in cash. It blocks the funds which could have otherwise been used in other productive avenues and lead to better financial management. Buying used equipment may result in the model getting obsolete, thus incurring higher maintenance costs. Another alternative is to go for acquiring contraction equipment on lease rentals. Reduce ownership costs and maintenance The construction company will require multiple equipment and models for its various projects. Purchasing all of them will cause a massive initial capital outflow. It also needs to set aside funds for maintenance, insurance, and other expenses. Also, the asset’s depreciation will mean erosion of the value of the equipment.

3. A dealer of Used Construction Equipment in Dubai gives out construction equipment on an operating lease model where the lessee pays a fixed monthly rental to the owner or lessor. The fixed monthly rentals include insurance, maintenance, replacement, and in many cases, even the operator/driver’s salary. This fixed all-inclusive monthly rental will help the company to budget its monthly expense on equipment and save on initial capital outflow. Protects Against Depreciation Construction equipment operates in harsh conditions and depreciates quickly. The wear and tear are higher, and the machines require regular maintenance and spare parts replacement. These costs increase over time. In many cases rises more than the equipment cost. Renting is a better option. It protects the user from depreciation, maintenance, and repairs cost. The hassles of maintenance are outsourced to the leasing company. Protects Against Obsolescence The construction industry is also prone to changes. Construction equipment manufacturers keep introducing new models of the equipment’s leading the old models getting obsolete. If the equipment is owned, there is a huge erosion in value. By renting equipment, one is protected from obsolescence. Also, the user can return the old model and replace it by renting a new model. The flexibility to have the latest equipment fleet helps the construction companies to bag more projects and increase their profitability. Eliminates Secondary Expenses Owning construction equipment means undertaking additional expenses like Road Taxes (For equipment like mobile truck cranes, excavators, and forklifts), insurance premiums, operators’ salaries, and storage yards when the equipment’s not in use. These can all be eliminated by renting the equipment. Once the project is completed, the equipment can be returned to the owner/ lessor.

4. Conclusion The cost of ownership of construction equipment is not cheap. Construction companies have to compare the earnings from a project and the operational cost of the equipment so that there is a surplus at the end of the asset life cycle. Otherwise, it will not be profitable. The problem happens when the equipment is lying ideal for a significant part of its life cycle resulting in an extensive loss in its resale/ salvage value. Source: -https://aaqmachinery.com/articles/reduce-the-costs-of-equipment- acquisition-and-upkeep/