# What is capital expenditure (CapEx)?

> Capital expenditure (CapEx) is money spent on long-term assets such as plant, machinery and buildings. Definition, examples and how it differs from OpEx.

Source: https://www.procol.ai/answer/what-is-capital-expenditure-capex/
Author: Shivangi Singh, Senior Content Writer (Procol)
Published: 2026-10-19

Capital expenditure, or CapEx, is money a company spends to buy, build or upgrade long-term assets: land, buildings, plant, machinery, vehicles, IT infrastructure and large software systems. The asset is expected to deliver value for more than one year, so the cost sits on the balance sheet and is depreciated over its useful life rather than expensed in the month it was bought.

## CapEx versus OpEx

- **CapEx** buys or extends an asset. A new packaging line, a warehouse extension, a fleet of forklifts.
- **OpEx** (operating expenditure) keeps the business running day to day. Raw materials, utilities, rent, maintenance contracts, salaries.

The split matters for tax, for reporting and for approval. CapEx is usually budgeted annually, approved at board or CFO level, and tracked as a project rather than a purchase.

## Common examples

- New or replacement production equipment
- Factory, office or warehouse construction and fit-out
- Vehicles, cranes and other heavy mobile assets
- Data centres, servers and network hardware
- Major software platforms with multi-year licences

## Why procurement cares

CapEx purchases are high value, infrequent and hard to reverse. A single contract can be worth more than a year of indirect spend, so the sourcing process is longer: technical specification, pre-qualification of suppliers, multi-round negotiation and often a reverse auction on the final shortlist. The buying process for this category is covered in [What is CapEx procurement?](/answer/what-is-capex-procurement/).

## Go deeper

- [Your Ultimate Guide to Unlocking the Secret to Efficient CAPEX Procurement](https://www.procol.ai/blog/capex-procurement/)
- [Procurement Spend Analysis: Why Is It Important for Business?](https://www.procol.ai/blog/procurement-spend-analysis/)
- [The Complete Guide to Procurement Terms and Abbreviations (2026)](https://www.procol.ai/blog/a-guide-to-common-procurement-terms-and-abbreviations/)