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How To Budget for Equipment Maintenance in Financing Plans

How To Budget for Equipment Maintenance in Financing Plans

How To Budget for Equipment Maintenance in Financing Plans

Navigating the complexities of equipment maintenance budgeting within financing plans can be a daunting task. This article distils the knowledge of seasoned industry experts to guide readers through effective strategies for incorporating maintenance costs. Explore the significance of historical data and the foresight required for long-term financial planning.

  • Factor Maintenance Costs in Financing
  • Use Historical Data for Predictions
  • Plan for Long-Term Maintenance Costs

Factor Maintenance Costs in Financing

In the construction business, equipment is our lifeblood. But it’s not just about getting the machines; it’s about keeping them running. That’s where smart financing comes in.

When I’m looking at financing equipment, I always factor in maintenance costs. It’s like buying a car—you’ve got to think about oil changes and tune-ups, not just the sticker price. I usually set aside about 10-15% of the equipment’s value each year for maintenance. It might seem like a lot, but it’s saved our bacon more than once.

I remember this one project where we financed a new asphalt paver. We built in a maintenance budget as part of the financing plan. About six months in, the hydraulic system started acting up. Because we had that maintenance fund, we were able to fix it right away without dipping into our project budget or delaying the job. The client was impressed with how quickly we resolved the issue.

Lee says, “In construction, equipment financing isn’t just about buying machines; it’s about investing in uptime. A well-maintained machine is worth its weight in gold…or asphalt, in our case.”

This approach has really paid off for us. We’ve been able to take on bigger projects because clients know we’ve got reliable equipment. Plus, when it comes time to trade in or sell our machines, they’re in great shape, so we get better value.

It’s not always easy to convince the bean counters to include maintenance in the financing package. But I’ve found that if you can show them the numbers—how much downtime costs versus the cost of regular maintenance—they usually come around.

In the end, it’s all about thinking long-term. Sure, you might save a few bucks upfront by skimping on maintenance, but in this business, reliability is everything. If your equipment fails, you’re not just losing money; you’re losing credibility.

Lee BookerLee Booker
CEO, Sacramento Asphalt Sealing


Use Historical Data for Predictions

If you want to build maintenance costs into financing, make sure that those costs are predictable rather than variable. I believe it is very important to get good historical data from similar equipment/projects to make sure you are making proper predictions. For instance, a client with a fleet of loaders cost us an average of $8,000/year per unit in maintenance based on past usage data. Including this expense in the financing schedule allowed them to avoid interruptions in cash flow and cut down on unexpected repair downtime by 20%.

Michael BenoitMichael Benoit
Founder and Insurance Expert, ContractorBond


Plan for Long-Term Maintenance Costs

When we look at financing equipment for construction projects, we don’t just consider the initial purchase or leasing costs. We factor in the long-term maintenance costs as well. It’s all part of taking a holistic view of the equipment’s lifecycle, which Lean principles really emphasize—maximizing value and minimizing waste at every step. We allocate resources for routine maintenance and unexpected repairs so the equipment stays operational throughout the project’s life without disrupting work or blowing out the budget.

A great example of this approach paying off was in a project where we were financing a large fleet of machinery for multi-year infrastructure development. Early on, we worked with our financing partner to include a maintenance plan as part of the deal. This wasn’t just about keeping the equipment in working order; it was about reducing downtime and ensuring that we didn’t face any costly surprises down the line. Some of the equipment needed repairs during the project, but because we had already planned for this, we didn’t face any delays, and the repairs were done quickly without additional unexpected costs.

In the end, by embedding maintenance costs into the financial plan, we were able to keep the project on schedule and within budget, without having to compromise on the quality of the work or equipment. This proactive thinking not only kept everything running smoothly but also built a solid relationship with the client, who appreciated the foresight and stability it provided. It’s all about minimizing risk and ensuring every part of the value stream runs as efficiently as possible.

Andrew MooreAndrew Moore
Director, Rubicon Wigzell Limited


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