How to Budget for Heavy Equipment Purchases

How to Budget for Heavy Equipment Purchases
How to Budget for Heavy Equipment Purchases
Author: Small Business Expert | March 1, 2022 | Topic: Used Equipment

How to Budget for Heavy Equipment Purchases

Heavy equipment is an investment in your business's future. When you add a new machine to your fleet, you want to make sure the money you spend is worth the work that piece of equipment will do.

When making such a large purchase, you'll need to know how to create a heavy equipment budget that works for your business's finances and will get you machinery that meets your needs. The following tips for heavy equipment budgets will help you make smart decisions for your company.

Why Do You Need an Equipment Budget?

When you're in the market for construction machines, you may be wondering, why is a heavy equipment budget important? Financial precision is the key to your business's success. Managing your finances effectively pays off in the long run through meeting business goals and achieving continued financial growth.

Equipment budgets help you:

  • Determine operating costs: Once you know how much money additional machines will cost, or you've already purchased some equipment, you should round out your budget with continual operating costs for each machine. Making a budget can help you see how much money each potential piece of equipment costs your business, so you can track your spending and assess whether future expenses are worthwhile.
  • Plan future purchases: When buying additional equipment, you need to know how much money you can realistically spend. A budget gives you this accurate picture and lets you know how an added expense may alter your current spending and saving structure.
  • Learn your financing options: If you're considering financing as a way to afford equipment, that journey will begin with you knowing how much money you can spend. Financing includes making an initial down payment and regular payments into the future. Your budget will indicate how much you can pay upfront and what a smart payment plan would look like.

How Much to Allocate to Your Equipment Budget

When determining how to budget for heavy equipment, the amount of money you set aside should reflect your business's size. If you're a larger company, you probably need more equipment and should expect to allocate more money to your budget than if you're a smaller company.

While all companies will have different needs and financial means, gain a clear picture of your financial reality to decide your own business's budget. Start with establishing what equipment you need for good business and separating it from the machinery you may want later on. Then, calculate the costs of each machine, including operating and maintenance expenses, to get an accurate look at how much everything would be.

Once you have an idea of the costs you'll need to cover, you can look at your business's finances and set a realistic budget amount that works with your other company expenses. Learning how to budget for construction equipment is a unique process for every company. However, the right budget will help you achieve your business goals without breaking the bank.

How to Create an Equipment Budget

Budgets will change as your business grows, makes purchases and encounters unexpected expenses. You'll want to create an equipment budget that's flexible enough to let you tackle major purchases without neglecting other spending areas.

Follow these steps for creating a heavy equipment budget:


1. Determine Your Needs

Part of making a budget is creating an honest assessment of your business's needs. Be intentional with the equipment you plan to buy. Maybe you want to purchase a machine you find yourself renting a lot or finally tackle a type of job you always turn down because you don't have the right equipment.

Determine Your Needs


2. List Equipment

Make a thorough list of all the equipment you currently own and another list of all the machinery you've decided you need. You may want to make a third list of equipment you may need in the future, such as replacements for machines you currently own. Budgeting for future expenses gives you an idea of how to spend money in other areas of your business while still being able to meet upcoming needs.


3. Get Quotes

For each piece of equipment you're looking to buy, look online or contact different dealers to get price quotes and gain an accurate picture of how much these machines cost. When you gather information from multiple sources, you'll get a good idea of the average price for each machine, which can help you know what funds to set aside to make a more accurate budget. Quotes will also provide you with the most current equipment prices.


4. Evaluate Operating Costs

Beyond the initial equipment costs, you'll also need to be aware of operating, maintenance and repair expenses that will come up throughout the machinery's life. Even after you've paid off your equipment, you still need to factor in additional expenses. Having a good idea of what costs to expect from your machines will help you judge how much money you can spare on additional equipment going forward.


5. Calculate the Business Advantages

After you've determined how much you'll need to spend on each piece of equipment, look at how much you could gain with that same machinery. If the monetary gains outweigh the expenses, you may be looking at a great deal that could be beneficial for your company in the long run.


6. Consult a Dealer

A trusted Cat® dealer can help you decide the budget that works best for your business. After you've drawn up some initial numbers, professionals can let you know anything else you need to consider and clue you in on good deals. A dealer will get to know your business and its goals to give you the best advice for how to budget for construction equipment.


7. Review

After you've made your budget, look it over to make sure it's accurate and includes everything it needs. Reassess frequently, such as every month, as well as whenever you make a big purchase or other important financial decision. Consistently revising your budget will help you learn what works and what you can improve to make even better financial choices in the future.

Find a Cat® Dealer Near You

Now that you've learned how to budget for heavy equipment purchases, you can begin browsing for machines in your price range. Your local Cat dealer can help you choose used equipment that fits your needs and budget.

Purchasing used machines is a great investment for your business operations. The lower costs of used equipment may justify your purchase if the price of a new machine is out of your budget. You can also choose used options for jobs when you want to avoid damaging new equipment. Whatever your reasons for choosing used, you can find quality machines that get the job done.

To start your search, shop used equipment online and find your nearest Cat dealer for more information.

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