12/22/2012 6:12 AM
How did you appraise the value of the current fleet? 3,800-4,000 hours is nothing. I've seen machines with that amount of hours on it going for $8,000-10,000 or more on the current market.
When I got here, almost everything was on a 48 month lease. We were turning in fairway mowers and diesel triplexes with 1,200-3,000 hours on them. Whoever bought that used equipment got a heck of a deal because the machines were impeccable. But, after having a continuous $10,000 monthly lease payment, I started looking at doing leases with a $1 buyout where we keep the equipment at the end. The reasoning behind this was that the few pieces we did own were still running great at 5,000-6,000 hours on them and costing me very little money to operate. I contribute this to our good preventative maintenance program. Therefore, we started doing $1 buyout leases on everything but gas greensmowers. My lease payment has reduced and my fleet has grown. This saves on spending capital dollars that can be redirected to improving the course. If you have minimal cash available, but good cash flow, I'd say look at doing a lease with a $1 buyout. Afterall, it's basically financing. And you get to keep the equipment at the end.
Now, if the machine is not dependable, and breaking down more than it is used, then regardless of amount of money spent on repairs, I'd be looking to replace. We're in the process of replacing a sprayer with 4,200 hours on it that breaks down every single time we use it. The repairs are minimal, but the downtime is killing me.
I'm kind of like Greg, if the machine is paid for, replacing anything up to a motor is a drop in the bucket compared to what a new machine would cost. This past year we had to repair two hydrostats on Toro 6500 fairway mowers. Each one cost me $1,200 each to repair. But, here's the catch, one was leased and being picked up two months after the repair, the other we own. Goes to show you can still face major repairs whether it is leased or not. The difference is that I basically wasted the $1,200 on the leased mower as I watched it loaded onto the trailer at the end of the lease. The other machine that we own is still used daily and the $1,200 repair is a wash.
Another example is the difference between my truck and my assistant's. I own mine and have no payments. He has a payment and said he would continue to have one so that he'll always have a new truck and not face major repairs. But I look at it as I'm saving roughly $5,000 a year on payments that would more than cover any repairs that the truck might need. Meanwhile, he's sending that check off each month regardless. After three years of no payments, I theoretically have $15,000 I could spend on repairs if need be. Of course, the truck is in great shape and runs fantastic with 138,000 miles on it. I'm not looking to replace it for the foreseeable future.