CapEx vs OpEx
You've no doubt heard the terms OpEx and CapEx, but what do they mean exactly and how does one relate to the other?
Let us explain what it means for you and your business.
CapEx vs OpEx explained
Capital expenditure (CapEx) and operational expenditure (OpEx) are two distinct types of company costs. Whereas CapEx refers to major, once-off purchases for use over the long term, OpEx funds everyday business expenses.
When comparing CapEx vs OpEx for commercial assets, one approach delivers clear advantages. By hiring equipment with your OpEx budget instead of buying it outright, you’ll benefit from the latest machinery without blowing through limited CapEx or delaying your project.
Here, we break down the key differences between CapEx and OpEx so that you can make the most of your money and minimise downtime. Discover how to take control of your cash flow, machinery and more with Yellowgate.
What is OpEx?
OpEx stands for ‘operating expenditure’, which covers the standard day-to-day costs of running a business. These predictable expenses are needed to maintain productivity but don’t add value in the long run.
Examples of OpEx expenses
- Worker salaries
- Raw materials
- Machinery hire
- Rental premises
- Utilities
What is CapEx?
CapEx, or ‘capital expenditure’, is reserved for buying or maintaining fixed assets that boost long-term performance. The goal of these unexpected and expensive once-off investments is to fuel future revenue.
Common CapEx costs
- Property, plant, and equipment (PP&E)
- Building construction and renovation
- Technology upgrades
- Research and development
- Intangible assets, such as patents
Core features of CapEx vs OpEx
CapEx
- Unexpected, once-off purchases
- Usually high-cost
- Limited budget allocation
- Brings lasting benefits to the business
- Reported as an asset on your balance sheet
- The machinery purchased depreciates over its useful life
OpEx
- Regular payments that are easily managed
- Typically low-cost
- Sizeable budget allocation
- Has short-term value for the business
- Reported as an expense on your income statement
- Expensed instantly and does not depreciate
The challenges with CapEx
The quickest way for a financial manager to maximise reported profits and prevent your business from looking heavy is to cut CapEx. Therefore, it tends to have a considerably lower budget allocation than OpEx - if not paused entirely.
Facing a spending freeze and need to get rid of contractors with machinery?
Don’t miss your deadline. You can still get the job done on time by renting the required machinery through OpEx - all while building equity in these assets.
This approach is also far more efficient than purchasing equipment with CapEx from the outset. For example, you could lose up to two weeks of productivity after a new machine’s arrival because it has to be assessed before use.
Use OpEx now and CapEx when you're ready
Don't wait for CapEx.
Acquire machinery sooner and reduce downtime with Yellowgate. We’re firm believers that precious CapEx shouldn’t be wasted on commercial equipment - especially when OpEx can be more easily controlled. That’s why our Rent Now, Buy Later solution offers dry hire with a pathway to ownership.
To get started, specify the machinery you need and we’ll buy it on your behalf. This way, you can rent the right machinery from us under OpEx but with the benefit of a capital expense. Every rental payment made will build your equity. Then purchase this machinery outright with CapEx at the end of your term - we’ll wait til you’re all set.
Alternatively, return it, re-contract with a lower rental rate or keep renting on Pay As You Go.
Whichever option you choose, the results are clear:
- Quicker access to required machinery
- Simple management of your OpEx budget
- Preserved capital
- Greater flexibility to scale machinery in line with market conditions
Stay in control with cost-effective dry hire
Now that you know the difference between CapEx vs OpEx, it’s time to say goodbye to drained capital and drawn-out downtime.
Yellowgate’s Rent Now, Buy Later contracts keep you in control of cash flow, rental terms, asset strategy, machinery and more. As a result, you’ll be able to accelerate your acquisition of project-critical equipment.
Whether in the mining, construction, civil works, agriculture, or heavy transport industry, we’ll help your team to complete every project on time and in budget.
Fill out our online form or call 1300 225 594 to discuss your dry hire needs.
