Mining equipment hire is a hot topic right now, because of the continued downturn in the resources market. With the price of iron ore continuing to plummet, mining maintenance contractors are trying to squeeze every dollar out of their business. So you can see why many people might think that hiring equipment is a much better deal right now, than buying.
There are however, some very good reasons why purchasing might be a better financial decision for mining maintenance contractors. So let’s take a look at the advantages and disadvantages of hiring versus buying.
Mining equipment hire versus purchasing
The problem with buying mining equipment is that you have to invest a large amount of your capital into these assets, which depreciate over time and need repairing and maintaining as well. Of course, if you sell your business in the future, then all of your equipment will be considered assets and will increase the value of your business, but you have to spend your capital to buy them in the first place.
When you purchase mining equipment however, you not only have additional assets for your business, but you can also have them customised to your exact specifications. You also don’t have to wait in line for hire equipment to become available, but you can be on top of any job that comes along immediately. This means that you can outbid other contractors and increase your revenue with new contracts, because you have the ability to fulfil these contracts today.
In the current financial climate however, many mining maintenance contractors are holding onto their capital, and waiting for other opportunities to come along, so they expand their business. With money in the bank, it is easier to invest in other opportunities or even branch out into a sideline business to increase your overall revenue.
This is why mining equipment hire has increased in popularity, but there are also some downsides to hiring instead of buying your equipment. The big problem is that you might not be able to hire the equipment when you need it, so you might lose contracts because you just can’t service them on time.
Whichever decision you make, mining maintenance contractors always make sure that they only deal with a reliable Australian company.