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E-Myth – “Why most small businesses don’t work & what to do about it”

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Part-time CFO Services | Purchasing Vehicles?

Business owners have difficulty affording the asset purchases that they need to make in their business in order to do their job efficiently says part-time CFO services. When making decisions about purchasing equipment or vehicles and their business, business owners often believe that buying used is going to be a much better economical purchase for them, because the price tag is cheaper. But determining if it is actually better purchasing the long run, business owners need to take several factors into consideration.

Even though the price take on his equipment or vehicles may be cheaper, business owners should consider the financing options when theyíre making that decision. More often than not says part-time CFO services, purchasing used vehicles and equipment will have a much shorter right then brand-new because the useful economic life of the vehicle or equipment has been shortened, the bank will require their money back sooner. Since the term is much shorter, the payments are higher, and will be more difficult for the business owner to come up with the cash a monthly basis to pay for. When financing brand-new vehicles and equipment, banks have a much longer term, because the vehicle equipment is at the beginning of their economic life. Lower payments is an important consideration for business owners because the less money they have to pay a monthly basis, the more they can keep the cash in their business uses operating capital.

Something else that business owners should take into consideration when they are considering buying used vehicles and equipment, is the increased cost it will be to run and maintain them. Used vehicles will be less fuel-efficient, and cost the business owner more in higher fuel cost says part-time CFO services. And also there is going to be more maintenance required for vehicles and equipment that are used. Business owners should take into consideration these make edits and fuel costs when calculating their monthly payment.

Business owners also should factor in that these used vehicles and equipment will probably break down more often, because their older and less reliable. Not only will fixing the equipment take time and money, it will also cost the business production time. This is much harder the cost to factor in, but something that business owners should be thinking of when they are considering buying used vehicles and equipment for their business.

Business owners may wonder if this is a good strategy to use all the time, even with equipment that they donít use on a regular basis. Part-time CFO service recommends that business owners can use caution when making the decision to purchase a used vehicle if itís a piece of equipment they donít use often. If it is a piece of equipment that is not in use daily, it matters less if that piece of machine breaks down occasionally. Business owners can take into consideration the cost of that used equipment and how much they would have to spend to rent it every time they needed to use it. If itís a seldom used piece of equipment or vehicle, can sometimes be more economical to buy used.

The author of Rich dad poor dad Robert your sake says good debt is a powerful tool, but bad debt can kill you, says part-time CFO services. Business owners should take this advice into consideration when they are making asset purchases in their business. Often when business owners need to replace equipment or vehicles and their business, they believe that purchasing used is going to be less of the strain on the cash flow. There are several things that they can take into consideration to determine if this is actually the right course of action for their business.

Entrepreneurs should ask their banks if there is a difference for terms on new versus used equipment and vehicles. Part-time CFO services says that business owners may be surprised to realize that that is actually true. Purchasing brand-new vehicles and equipment, can be advantageous because business owners will be able to have a lengthy term of their loan. Which means lower monthly payments, which will help keep the cash in their business. Used vehicles and equipment will have much shorter terms because the bank will want to get their money back before that equipment reaches the end of its life. It will be much more difficult for the business owner to pay back shorter terms, because they will have higher payments, which will put the financial strain on the business. This is a great example of the difference between good debt is a powerful tool, and bad debt hurting the business.

Business owners often donít take into consideration the increased cost to maintain and operate used equipment and vehicles says part-time CFO service. The only look at the price take and their loan payments, but that would be a mistake. Not only will older vehicles have a higher cost to fuel the, but older equipment and vehicles will also have a higher cost to maintain. Business owners need to factor in that higher cost to their monthly payments. That is factored in, business owners can start to see that it is actually a much better option to purchase new equipment to eliminate that cost.

In addition to increased maintenance, used vehicles and equipment are often less reliable which leads to a higher probability that they will break down. Business owners need to consider if they can not only afford to pay to fix that equipment, but if they can afford to lose production while that piece of equipment is being fixed. Not only is this a hit to the business because of the lost productivity, but they will also have to pay for staff to not be working. Part-time CFO services says this is an important calculation to take into consideration when business owners are deciding if they should purchase new or used vehicles or equipment. Taking all of these things into consideration, business owners will often see that buying used equipment is not as economically sound is they first assumed.