Equipment Ownership a Factor in Facility Maintenance Job Costs

In the Painting and Facility Maintenance Industry...

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A general rule of thumb is that if you use a piece of equipment more than 60 to 70 percent of the time, you should consider purchasing it. However, if your operation rate doesn’t exceed that threshold, maintenance companies should consider renting or leasing the equipment. Simply put- if renting a machine costs as much or more than owning it, then it's time to buy.

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To contractors and subcontractors whose work requires the use of expensive equipment, equipment cost, whether for rented or owned equipment, is a major element of job costs. While, in the case of rented equipment, rental payments made to the leasing company will appear as an expense item this will not be the case where the equipment is owned rather than leased.  Moreover, unless a piece of equipment is rented for, and charged as, a cost item against a particular job, the rent paid must be allocated to the jobs on which the equipment was used to obtain the rental cost for a particular job.  In most cases the cost of renting equipment gets passed on to the customer.

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In addition to rental costs, the leasing company may charge for delivery of the equipment and there may be permitting costs, especially with regard to large items of equipment.  Some equipment leases also place the burden of making major repairs on the contractor.  Leasing or renting should be seen as a forerunner to buying since it gives a chance to test the construction equipment without the burden of large cost or long-term investments. Normally the rental of construction equipment for six months leads to out right purchase to avoid the loss of equity investment. 

Cost of ownership of any equipment is high at the beginning (initial purchase price and financing if required) but resulted in higher profits on jobs once the equipment is paid off, leaving only maintenance and insurance costs. Overall, purchasing equipment enhances profitability because it is less expensive in the long run, especially for established businesses that can plan for equipment longevity. 

On the other hand, leasing is a viable option for facility maintenance companies providing an infrequent service or conducting a job that is not part of their core business. The costs may be less, but they remain constant from job to job and can end of taking a bigger bite out of your bottom line.

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For more information please call Chris Murphy at 770-949-5776 or email cmurphy@harrisoncontracting.com

http://www.harrisoncontracting.com