Hello, everyone.
This is Enta.
The other day, I wrote about unit prices.
How to Determine Construction Unit Prices and How to Calculate Them (For the General Public)
Today, I’d like to share some thoughts on how to decide whether or not to buy construction equipment.
I’m writing this based solely on my own subjective views and experiences, so it may differ from your own perspective, but
Please understand that.
In tax matters, there is a concept known as the useful life for depreciation, and we’ll start by using that as our basis.
Here’s a brief explanation of depreciation.
You cannot write off a machine purchased for 10 million yen as an expense in a single year.
We allocate the expense by dividing the total amount over the useful life.
For example, if the useful life of construction equipment is 6 years, then 10 million ÷ 6 years ≈ 1,666,666 yen
This is a tax system that allows you to claim this much as a business expense.
The useful life is determined based on the specific machinery or product, so please check the National Tax Agency’s website or similar sources ^^
So, here's how to approach buying a machine.
How often do you use it over the course of a year?
That's what matters.
But there are some gadgets that, even though you own them, you don’t actually use very often, right?
Which means maybe I didn't really need to buy it after all, lol.
However, since having it might lead to job opportunities, it’s okay if it’s an upfront investment.
Generally speaking, my policy is that if I’m going to use something for more than three months in a year, I’ll buy it.
Let's say it costs 500,000 to rent a machine worth 10 million for one month.
After three months of use, it will total 1.5 million.
If you keep that up for six years, you'll be able to buy it, right?
If renting a machine that costs 6 million for one month costs 80,000, then the cost for three months would be 240,000.
A machine costing 6 million has a useful life of 6 years, and the annual depreciation is 1 million, so the figures are 240,000 and 1 million.
It's better to rent.
Since the purchase payments will exceed the amount borrowed, this will put a strain on the company's operations.
However, as I mentioned above, the reality is that,
Since having it might lead to job opportunities, it’s hard to make a blanket statement.
Plus, there's that rush of excitement that comes with owning something, and that feeling of "I finally got it!" lol
If you're the type who's like, "Let's get pumped up, take some risks, and give it our all!" then you should definitely buy this lol
Also, since we can’t do the work without specialized equipment (which isn’t available for rent), we need to have it on hand.
A new car really does get you excited, doesn't it?
However, please don't make purchases just for the sake of unnecessary tax savings!
No matter how much you spend, if you buy things just for tax purposes, you’ll end up running out of cash and struggling like crazy lol (that’s our company right now).
I believe we shouldn't try to cut taxes unnecessarily—we should pay our taxes properly and in full!
So I think taking out a loan from a bank to make the purchase is the best way to hedge against risk.
Even if you're making a profit, once you run out of cash, you're headed straight for bankruptcy despite being in the black lol
Be careful—when it’s financial reporting season, sales reps from all the machinery manufacturers come out in droves to try to make a sale ^^
I think you should go ahead and buy as many machines as you want that cost less than 3 million.
If it's just that much, I can pay it back right away from my paycheck.
I do think that, for machines costing over 5 million, it’s best to take the price difference between renting and buying into account to some extent.
Machines are great when you buy them, but they always come with maintenance!
Please keep in mind that maintenance also costs money.
So, that’s how to think about money when buying a machine.
I hope this is helpful in some way.
See you later.
