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Managers need to review the financial impact before making a final decision on whether to buy or rent a piece of equipment for landscape construction projects.
To deliver successful landscaping projects, it is essential to maintain proper equipment records and monitor uptime so managers know the mean time between failure and mean time to repair. These important metrics enable managers to assess performance trends, compare equipment efficiency, make smart repair-or-replace decisions, and optimize life-cycle costs.
One key decision point involves the elapsed operating hours at which the cumulative cost to repair equals the cost to replace. After reaching this point, continued repair will cost more than replacing the equipment as it ages and requires more frequent and expensive repairs. This point also offers managers an opportunity to look at advances in durability and features that make replacement even more attractive.
For this reason, many managers have implemented fund accounting, which uses operating funds for routine repairs and a replacement fund for major replacements, each year applying a portion of the budget to each fund. Using this system, replacement capital builds up steadily based on life expectancy of the equipment. When the replacement point arrives, the capital is available, plus interest income. Managers are not forced to pay for the equipment, as well as the finance charge, on borrowed money.
Thomas A. Westerkamp is a maintenance and engineering management consultant and president of the work management division of Westerkamp Group LLC.
Financial Impact on Landscape Equipment Important Factor