, Building
A groundworks firm in Derbyshire bought a three-tonne excavator for £34,000 because the hire bills had reached £11,000 in a year and that felt absurd. Eighteen months later the machine had done 380 hours, sat through a winter under a tarpaulin, needed £2,900 of hydraulic work and a new set of tracks, and the firm was still hiring a second machine every time two jobs overlapped.
The arithmetic was not wrong. The question was.
Utilisation is the number that decides it, not the price
Hire rates are quoted per week and purchase prices are quoted once, which makes direct comparison feel easy and makes it misleading. The honest comparison is cost per productive hour on site.
Take the excavator. Hired at roughly £180 a week plus transport, twenty weeks of use in a year costs about £3,600 plus movements, call it £5,000. Bought, the same twenty weeks costs you depreciation, finance interest, insurance, servicing, tyres or tracks, thorough examination, storage and the transport you still have to pay for. Spread across 400 hours, ownership is expensive. Spread across 1,400 hours, it is cheap.
The crossover point differs by machine, but the shape is always the same. High-utilisation items belong in your yard. Occasional items belong on hire, however irritating the invoices look in aggregate. The irritation is a tax on the visibility of the cost. Owned plant costs just as much, it just does not send you a weekly reminder.
Work out utilisation from your actual job records, not from ambition. Count the weeks the machine was genuinely working, not the weeks it was on a site.
Ownership brings obligations that hire companies absorb for you
When you hire, the supplier is responsible for the machine's condition, its statutory inspections and its replacement when it fails. When you own it, all of that lands on you.
Lifting equipment falls under the Lifting Operations and Lifting Equipment Regulations 1998. Thorough examination is required at least every six months for equipment used to lift people and for lifting accessories such as chains and slings, and at least every twelve months for other lifting equipment, or in accordance with an examination scheme drawn up by a competent person. Everything else falls under the Provision and Use of Work Equipment Regulations 1998, which requires equipment to be maintained in efficient working order and in good repair.
Then there is fuel. Construction lost the entitlement to use rebated red diesel from 1 April 2022 under changes made by Finance Act 2021. Plant on site now runs on full-duty white diesel, which moved running costs materially and which affects owned fleets more visibly than hired ones, because hire rates absorbed the change into the weekly figure.
And there is downtime. A hired machine that breaks is the hire company's problem and usually their replacement within a day. An owned machine that breaks is your engineer, your parts lead time, and your crew standing on a site being paid.
The tax treatment is genuinely favourable, which is not the same as free
Capital allowances make buying more attractive than the cash outlay suggests, and it is worth knowing which regime applies to you.
Most plant and machinery sits in the main pool and attracts writing down allowances at 18% a year on a reducing balance. The Annual Investment Allowance permits 100% relief on qualifying expenditure up to £1 million a year, and that £1 million limit was made permanent rather than temporary. Companies within the charge to corporation tax can also use full expensing, introduced from April 2023, giving 100% first-year relief on qualifying new main-rate plant with 50% on special rate assets. Full expensing is a company relief, so sole traders and partnerships rely on the Annual Investment Allowance instead.
Three practical cautions. Relief is against taxable profit, so it is worth whatever your marginal rate is and nothing at all in a loss-making year beyond carrying the loss forward. Assets bought on hire purchase generally qualify when brought into use, but assets on a true operating lease do not, because you never own them. And when you sell a machine on which you claimed full expensing, there is a balancing charge, so the relief was a timing advantage rather than a gift.
Finance is where good decisions quietly turn bad
Very few contractors buy plant for cash, and the way the purchase is funded often matters more than the purchase.
- Hire purchase: you pay a deposit and instalments, you own the machine at the end, and it sits on your balance sheet with the debt against it. Capital allowances are available. The instalment is fixed whether or not the machine works.
- Finance lease or contract hire: the funder owns it, you pay to use it, and payments are generally deductible as an expense. No capital allowances, no residual value, and no asset to sell when work dries up.
- Cash: no interest, no covenant, and a hole in your working capital exactly when a main contractor decides to pay you in 60 days.
The failure mode is always the same. Firms buy at the top of a cycle, when utilisation is high and confidence is higher, on four-year terms. The cycle turns after eighteen months. The instalments do not.
Resale value is the part nobody forecasts and everybody relies on
Construction plant holds value reasonably well by the standards of business assets, particularly common machines with good service history and low hours. That is exactly why residual value should be treated as an assumption to be tested rather than a comfort.
Brand matters, hours matter, and a complete service record matters. So does specification: the mid-range machine that everybody wants sells in a week, the unusual attachment configuration sells in six months at a discount. If your case for buying depends on getting £16,000 back in year five, run the numbers again at £11,000 and see whether the decision survives.
The machine that sits in the yard from November to March is not saving you hire charges over the winter. It is depreciating, insuring, seizing and tempting somebody to lift it off a trailer at three in the morning.
Where this shows up in the game
Construction arrives in Business Baron with the Property & Construction Track, an add-on to the full game. Capacity in the game is the assets that actually deliver it, so a builder's limit is vans and plant. Buying outright uses the cash you needed for wages, financing commits the years ahead, and the capital allowance lands in the quarter it would really land in.