Part-time CFO services | New Versus Used Equipment?

When business owners are upgrading their equipment, and they are looking at financing options, one thing that they should ask their bank is does the age of the equipment or vehicle they are buying affect the length of the loan says part-time CFO services. Business owners are often surprised to learn that purchasing used vehicles will have a much shorter term than purchasing new. The reason for that is banks will want to get the money that theyíve loaned pay back before the end of the life of the asset. Since used vehicles have a shorter lifespan on them, banks often ensure they have a much shorter term. This is going to be much more difficult for a business owner to pay back, because a higher monthly payment will be a larger financial strain on the business owner.

Even though used vehicles or equipment they have a smaller price tag attached to them, it also is often more expensive to run and maintain says part-time CFO services. Business owners need to add the monthly payment on to whatever the increased operating cost is as well as what the increased price would be to regularly maintain that equipment. Once they have factored in both of these costs together, in addition to the higher monthly payment they will have to be paying due to the shorter term of the loan business owners may see that it is much less economically viable to purchase used.

Another factor that business owners may want to consider when they are buying equipment and vehicles, is how that purchase effects your brand says part-time CFO service. Business owners may not know, but purchasing used vehicles and equipment often looks less professional, or like the business is less serious. Business owners customers may not even realize they are judging that business, but operating used vehicles and equipment may cause a customer to have lower confidence in the business.

When business owners are ready to replace their equipment, they will want to make the best economical choice for their business, says part-time CFO service. Not only should they take into consideration the purchase price of the vehicle and equipment , but also what is the cost to maintain and to operate that equipment, and what it says about their brand. They take all of these factors into consideration, business owners often see that their best economical purchase is to purchase brand-new equipment vehicles for their business.

many business owners need to make very smart purchasing decisions in their business, in order to maximize the amount of money that they keep in their business says part-time CFO services . They need to make some decisions on what is most economically sound in order to maximize their purchase to get great equipment that wonít affect their bottom line as much. Many business owners believe that purchasing used vehicle and equipment in their business can help them achieve that goal, and in order to make that determination, they should ask several questions to figure out if thatís the right decision for them.

The first question that business owners should ask their financing company is how does the age of the equipment or vehicle their purchasing affect length of the loan says part-time CFO services. Many business owners are under the misconception that they will be able to get the same terms on their loan whether the asset that they by is new or used. This is a very dangerous assumption to make because the truth is banks figure out the useful economic life of the asset when they decide how much time a business owner has to pay back that loan. Since used vehicles and equipment have a shorter useful economic life, the term of the loan is shorter. The reason why this is not advantageous for business owners, is that the shorter the term is, the more of a financial strain it puts on the business. Since running out of cash is one of the top three reasons why businesses close their business, avoiding this is an extremely important strategy in business.

Another consideration business owners will want to have when making the decision between used and new vehicles and equipment is how does increased maintenance costs affect monthly cash flow says part-time CFO services. Often business owners only consider the price tag when making asset purchases, but that can be a mistake. Since used vehicles and equipment are less reliable, they will require more maintenance. Often they are also not under warranty like new vehicles and equipment, and not only did they have a higher cost to maintain, they will also have a cost associated with them when they break down. Business owners should calculate the cost of maintenance and repair into their monthly payment.

Once business owners realize that purchasing brand-new is a better option used, they need to take several things into consideration to avoid spending too much money on new equipment and vehicles. Part-time CFO service recommends that business owners leave their ego at the door so to speak when they are purchasing new assets. Recommendation is for business owners not to over by when theyíre buying new, but to buy only what is needed. That is to say to buy reliable and functional equipment and vehicles that are at the beginning of their usage cycle. Business owners can leave out the fancy bells and whistles, as that is not going to do their bottom line any favours.