The Hidden Costs of Owning Construction Equipment

Construction equipment is the lifeblood of any building project and owning your own equipment can be a tempting proposition. 

The ability to rent it out or use it for your own projects offers the promise of significant profit and control.  

Tax breaks on equipment purchases and potential long-term cost savings add to the allure.

However, before you dive headfirst into equipment ownership, consider the hidden costs that can lurk beneath the surface. These costs, from routine maintenance to depreciation, can significantly impact your bottom line, regardless of whether you buy new or used equipment.  

In this article, we explore the six hidden expenses of owning construction equipment, and empower you to make informed decisions before purchasing.

1. Initial equipment costs

Purchasing heavy construction machinery requires significant financial investment, which can strain you and your business, and negatively impact your capacity to invest in other areas.

Additionally, there are other initial hidden expenses to consider including;

  • Sales tax that is at times charged during purchase
  • Transportation of the construction equipment to your premises 
  • Assembly and installation of the equipment 

If you buy construction equipment on credit, paying for it may deplete your business cash flow and tie up your lines of credit, stagnating your business growth.

2. Insurance costs

Construction equipment insurance acts as a financial safety net in case of unforeseen events like accidents, fire, or theft.

While it can’t prevent reputational damage or project delays caused by equipment loss, it will help you get back on track faster by covering repair or replacement costs.  

Shop around for reputable insurance agents who can create a customised plan that meets your specific needs and equipment.

3. Variable costs

Variable costs are the lifeblood of equipment ownership and can fluctuate depending on usage. These include fuel, transportation, lubricants, parts, and repairs.  

Skilled operators can significantly reduce variable costs. 

However, hiring qualified operators may require a higher initial investment, but it pays off in the long run. Proper operation extends equipment life, minimises breakdowns, and lowers repair costs.  

Additionally, factor in safety training for your operators. This not only protects your workers but also helps avoid costly lawsuits arising from construction site injuries.

Consider hiring a personal injury lawyer to inform you of the regulations surrounding the ownership and use of construction equipment to which you should adhere. The Provision and Use of Work Equipment Regulation (PUWER) 1998 is an example.

These regulations ensure that construction equipment is suitably used for its intended purpose and protect operators from associated health and safety risks.

4. Maintenance costs

Beyond maintenance, secure storage is crucial for protecting your investment.  

Storing equipment in a secure facility shields it from theft, vandalism, and weather damage.  

Storage costs vary depending on size, location, and duration. Consider these options: renting space at a dedicated facility or building on-site storage. Whichever method you choose, GPS tracking and clear equipment labelling are additional deterrents against theft.  

Construction equipment management software can streamline maintenance scheduling, prevent unnecessary repairs, and combat theft through improved tracking.

5. Depreciation costs

The monetary value of your construction equipment will depreciate regardless of how well you maintain it due to wear and tear.

Depreciation of the value of construction equipment also occurs due to the introduction of other technologically advanced equipment to the market.

This means your equipment’s resale value will decrease with each year you own it. Despite these challenges, you can claim depreciation in your taxes as a legitimate business expense.

However, you can lower depreciation costs of your construction equipment by investing in good maintenance.

6. Taxes

Some taxes are associated with owning construction equipment, such as sales tax, property tax, and local authorities licences, which may be charged when you use and store equipment within certain city limits during a construction project.

Other taxes to consider are fuel tax, which you will incur from fuel purchases.

These taxes are assessed based on the equipment’s age, current market value, and condition.

You must be aware of the tax requirements in your locality associated with construction equipment ownership and comply with them.

A tax accountant familiar with local regulations can help you budget for and comply with these tax requirements.

Final thoughts on the hidden costs of owning construction equipment

Those are the hidden costs of owning construction equipment you can expect if you want to invest in construction equipment ownership.

You must consider all these factors, along with your budget and how long you will use the construction equipment, to determine whether you will profit sustainably from owning or renting construction equipment.

However, owning construction equipment is very beneficial for businesses that frequently use it.

Although it requires heavy initial financial investment, it can save contractors a lot of money over the long term and guarantee business success by offering convenience, efficiency, and optimal professionalism.

Remember, although buying used equipment might seem like a good decision because of the low initial purchase cost, that equipment may be more trouble than it’s worth.

Therefore, invest in good quality modern construction equipment from the start to guarantee long-term cost efficiency, project efficiency, and high resale value if you choose to sell it.

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