Equipment Financing Guide
The Hidden Costs of Not Replacing Equipment
Everyone knows the advantages of updating equipment: more capacity, better performance, new features, keeping pace with competitors. The costs of not replacing it are quieter, and they add up. Old equipment breaks down more and waits longer for parts; it demotivates the people who run it; it makes customers wonder about the rest of the business; and it is less safe. Here are the four hidden costs, in rising order of how often they are noticed.
Cost One
Old Equipment Causes Downtime
This one is the most obvious. Older equipment breaks down more than newer equipment does, and because it is old, the part always has to be ordered. While you wait for the part to arrive and for the second service call, the equipment is not earning you money. Depending on the business, that pushes other jobs out too. Think of a seasonal business like a pool installer: backhoe downtime in the spring is very costly.
Cost Two
Your Employees Do Not Like Old Equipment
There are thousands of studies, books and seminars on motivating employees, and one of the biggest demotivators is old equipment, especially when they can see the competition with new gear. The troubling part is that employees will rarely say anything to management. But in the breakroom they make fun of the old lathe they nicknamed Creaky, and because you encouraged them to read the trade publications, they know other shops are running new CNC lathes.
Kidding aside, this goes for all equipment. Old equipment does not encourage, or attract, good workers, and it is not as safe as new equipment. More on safety below.
Cost Three
Your Customers Do Not Like Old Equipment Either
A relative of ours once had a tree service come out to quote a trimming job. He had found the company’s advertisement on a local restaurant’s placemat (those things do sometimes work). But once the truck pulled up, he suspected right away that he was not hiring them: the estimator had come straight from another job in the company dump truck, built around 1987 and looking every year of it, complete with leaking oil, in front of a house where the owners keep a clean driveway.
Fair or not, the truck made a potential customer assume the company’s other equipment was old as well, and it made him quietly question the company’s finances and whether it carried adequate insurance. The old dump truck not only made a bad first impression and sank the hire; it wasted the company’s time too, because the job was driven to, looked at and quoted, and then went nowhere.
It does not have to be a truck. Think of a store with old fixtures and shelving, your company’s waiting room or lobby, or the sign outside that has seen better days. Nobody ever consciously says they are not buying because the lobby furniture is old, but they notice it, and it shapes their impression of everything else.
A newer business may only be able to afford a thirty-year-old truck to start, and there is nothing wrong with an old or used truck if that is truly all a company can afford. There is no excuse for a bad first impression, though. Show up for quotes in a car instead, and upgrade the truck once revenues justify it. At two years in business, Crest Capital can finance the replacement; work truck and dump truck financing is a specialty.
Cost Four
Old Equipment Is Not as Safe
From better brakes, backup cameras and accident avoidance on newer vehicles to the safety interlocks on modern CNC machines that keep the doors closed until everything stops, almost all new equipment is superior to old in terms of safety. That can save you from costly accidents and employee downtime, and it keeps the people who run the equipment happier, because employees like safer equipment.
In the end, there are plenty of benefits to updating equipment, and there are real drawbacks to keeping old equipment instead of replacing it. Some are obvious and some are not, but they are all there, and they all cost money. When the replacement makes sense, equipment financing from $10,000 to $500,000 lets you put the new machine to work now and pay for it out of what it earns, at a fixed monthly payment, with the equipment itself as the only collateral.
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