An equipment replacement reserve is a dedicated fund where municipalities accumulate money to purchase new vehicles, machinery, and equipment when existing assets reach end of life. Common items funded include fire trucks, garbage trucks, graders, snow plows, mowers, computers, and specialized equipment. The reserve approach spreads replacement costs over the equipment's lifespan rather than causing budget spikes when multiple items need replacement simultaneously. Contributions are typically based on anticipated replacement costs divided by useful life—a $400,000 fire truck expected to last 20 years would require $20,000 annual contributions. Well-managed reserves ensure equipment can be replaced on schedule without borrowing or delaying necessary purchases. Deferred equipment replacement saves short-term money but often increases maintenance costs and can compromise service delivery when aging equipment fails.