Advantages and disadvantages of buying new machinery

Regardless of a company’s size or profit margin, the decision to buy new machinery is a significant financial investment that should not be taken lightly.

This is especially true today when technology is evolving at such a dramatic pace that it can often be difficult to keep up with updates.

There are many reasons why purchasing new equipment can create value for your company. However, it is necessary to consider a variety of factors related to your business needs to ensure that you make the decision that is right for you.

Finance

One of the most evident benefits of buying new machinery is guaranteeing that your company stays up to date with the newest and most advanced technology available in your industry.

Owning such equipment can provide your company with a competitive edge over rival businesses by enabling you to increase and maintain your productivity, capabilities and overall profitability.

However, while being able to afford new machinery outright without any financial repercussions is ideal, this is not a reality for the majority of companies – especially those that are small or just getting started.

Buying new machinery is a generally expensive undertaking, which, because of financial constraints, can have a significant impact on a company’s cash flow. In some cases, this could require reducing investments in other areas of the business, which can slow growth.

Fortunately, there are many finance options available to companies that want to invest in new machinery, including bank loans and asset finance.

Asset financing allows companies to obtain a new asset without having to pay the full amount for the machinery up front; instead, a company agrees to pay monthly fees over a period of time, which can help ease the financial burden that purchasing new machinery can have.

Asset financing provides companies with the flexibility of being able to purchase new machinery without having to wait until the company’s cash flow is significant enough to finance the machinery at one time.

Furthermore, asset finance providers tend to be more flexible than other lenders, including banks.

Advantages of buying new machinery

With financial assistance readily available, buying new machinery is a viable option for many companies. So, what are some of the advantages of buying new machinery?

Improving Capabilities

Because new machinery tends to be at the top of its class in terms of technology and functioning, new machinery can have a positive impact on a company’s efficiency, enabling employees to work faster and increase productivity.

Staying ahead of the technological curve can be a strategic way to keep ahead of the competition.

Ownership

While leasing is an option when it comes to acquiring machinery, many companies prefer ownership because of its simplicity – no agreements, negotiations or contracts to sign.

Ownership also gives companies the freedom to determine whether a machine needs maintenance or not, as well as the option to sell later on.

Improving Safety

Newer equipment is usually exempt from some of the safety risks that can be presented by old equipment, even if it’s well-maintained. New machinery reduces the risk that an employee will be injured while on the job, as safety concerns are a primary point that new machines work to improve upon.

Time-Saver

New machinery is less likely to require repairs, which can help your company avoid delays and keep projects running on time. This can have a significant impact on productivity.

Tax Incentives

While it’s true that new machinery may cost more up front, there may also be opportunities to take advantage of tax incentives.

Professional Image

In addition to increased productivity, having new machinery also signals that your company takes pride in its work and that you will accept nothing less than the best when it comes to providing your clients and customers with the highest quality services.

Weighing your options

Clearly, there are many advantages when it comes to buying new machinery. However, it is important to note that the impact each of these advantages has can vary greatly from company to company, and in some cases, negative aspects related to buying new machinery may outweigh the positives.

For example, even with financing, new machinery can still be an economic burden. Furthermore, there might be a cheaper, used version that will fulfill your company’s needs just as well as a new machine. Leasing your machinery is also a possible option.

Additionally, some machines might only be necessary for a limited amount of time, in which case investing in a new machine doesn’t make sense from a long-term perspective.

This is especially true when you take into consideration storage, maintenance, and transportation.

Finally, depending on your company’s industry, technological advancements may mean that your machinery is in constant need of updating. Frequent updates can become costly over time, making renting machinery a better choice.

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