Budgeting for construction equipment expenses can be a challenging task for construction firms of any size, especially those experiencing rapid growth. As the Lakeland construction attorneys of Cotney Construction Law discussed in the first part of this article, construction companies need to closely evaluate their equipment investment options and consider key factors, like projected usage and the additional fees incurred when investing, before they purchase something that ends up in storage with a depreciating value.
In the second part of this article, a Lakeland construction lawyer will discuss some scenarios in which a construction firm should purchase the equipment they need and a few of the potential drawbacks. If you’d like to skip ahead and read about scenarios in which you should rent or lease equipment, please read parts three and four. For legal assistance or tax strategies to save money for your construction business, speak with the experienced construction lawyers at Cotney Construction Law.
Should I Buy Construction Equipment?
There are certain undeniable situations in which a construction firm should purchase equipment, as it will be in regular use. Of course, when you own equipment, this gives you access to utilize the machinery for projects whenever you need to. Your workforce will also see increased productivity and execute their tasks at a high level when they are familiar with the equipment they are using. This could help avoid liability on projects when your employees are comfortable with the work they are executing.
Considering the Long-Term Payout
On the other hand, when you invest in equipment, you’re putting a significant payment down that will quickly eat away at your cash flow. Purchasing equipment is a significant investment that can impact your backlog of projects or affect your ability to put bids on upcoming projects. However, owning the equipment will reduce long-term expenses as you won’t be dealing with rental or leasing interest rates when you buy equipment outright.
As we discussed in the last section, if you do invest in equipment ownership, you will need to consider an exit strategy. Will you resell this equipment? What will be the projected value of the equipment at the time you intend to do this? Other things to consider are the price of ongoing maintenance and repair costs, ensuring the equipment is safely stored away, and investing in security measures to protect the equipment when you are away from the jobsite.
Fleet Management and Tax Advantages
Other than how often you will use the equipment and the associated costs of owning, another factor is whether or not it’s feasible for you to manage the equipment long-term. Growing your business and ensuring excellent fleet management go hand-in-hand, so it’s important to ensure you are maintaining the equipment so that the resale value will be worth the initial investment. Lastly, if you are considering buying new or used equipment, consult a Lakeland construction attorney to learn more about tax saving strategies like bonus depreciation on capital purchases. For example, a 2018 tax act gave equipment investors a 100 percent write-off on purchased equipment.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.