invest or rental equipement !

Hi

All depends on what sort of a company you are and what sort of projects you work on, to tie up large amounts of cash on major plant & equipment that is only used for short periods is not good business sense.

The problem if you buy the equipment you will need to service, repair and store when not in use, well worth leaving this problem with a hire company, who will be set up to carry out the work.

However if you are doing a job like a dam, when the Dumpers, Scrapers etc. will be written off at the end of the work, then purchase will be well worth considering.

If you have a continiouse need for equipment (say Tower cranes, batching plants, scaffolding etc), it sometimes pays to set up a separate hire company to purchase and then hire the equipment to the project. (This can be good way of moving money from a project to other parts of the company).

Perhaps this subject is best for the company accountants to ponder, rather than the planners!!

regards

John

hi jones

thanks, actually we are a general contractor who do all the work for ourselves.

"If you have a continiouse need for equipment (say Tower cranes, batching plants, scaffolding etc), it sometimes pays to set up a separate hire company to purchase and then hire the equipment to the project. (This can be good way of moving money from a project to other parts of the company)"

that’s exactly what I was looking for, can u explain more

regards
morph

Hi Morph,

In the UK a lot of the construction companies I have worked for have within their corporate structures a separate company that will both own and hire out plant and equipment. These hire companies will always hire to their own companies (Company policy), or can even hire to other companies, in some cases your compeditors!

When a new Contract is awarded within the group, the plant & equipment will always be hired from the "in-house" hire company. The same principle is used for supplying labour to a contract, when a seperate company is set up to hire out labour.

These companies normally buy the plant & equipment, usually at a compedative prices as they can bulk buy, and then hold it in their own yards / workshops etc,. When requested they will deliver to the prospective site, maintain and remove the equipment when the job is completed and take it back into storage.

Sounds nice, but the rates that I have seen used by the "in-house" hire companies can be very high, as they are not in a compeditive market. But these can be high due to the accountants moving money around within the company for tax benifits, as is the case of some companies I know!

If you thinking of this type of set up, you need to consider the financial benfits very carefully along with tax benifits etc., this is why I would recommend chatting with the company accoutant etc.

Regards

John

hi john

"a seperate company is set up to hire out labour"

oops, what are u talking about !

morph

Hi Morph

I mean by a "separate company" - another Company / Division / Group - all depends on how you would like to structure the organisation.

This company would trade under as its own identity - under its own name - but would still be owned by the same "parent" company as the one that does the construction work.

Hope this makes more sense.

John

ah ok

hell on my english

morph

Hi,

Not your English - my spelling at fault!!!

John

Well,

i think it depends on a physical analysis based on the expected risk (probability of ocurance) and the cost of ur project ( broken down into decision tree) so u could do a forward analysis to calculate the expected monetary value which is physical value will make u decide easier wither to buy or to rent.