We all know it… construction equipment is EXPENSIVE! It is one of the major decisions construction company owners have to research when deciding whether or not they should purchase, rent, or lease their equipment.
Like most decisions, there are pros and cons for both sides. Let’s look at a few of them, and hopefully, it will help you be able to make a better-informed decision about what will work best for you.
Things to Consider When Deciding to Buy, Rent, or Lease
How often will you use the equipment?
If you’ll be using the equipment more than half the time, it probably makes more sense to purchase it outright. This way it’s always available, and your operators can become accustomed to that exact machine, rather than having to adjust to different ones.
There are ways to help you narrow down your best option. Here are some questions to ask yourself when considering buying vs renting or leasing construction equipment.
This can increase your bottom line simply by increasing your crew’s productivity. If you know you’ll only need it occasionally, or will just use it during certain seasons, you’re probably better off renting as needed.
Where will you use the equipment?
If your business is regional or even national, you will need to consider the cost of transporting your equipment to the project sites. Unless your business is centralized, you may consider renting and having the equipment dropped at your site.
How much total cost of the equipment is involved?
You’ll want to gather some data and do some number crunching to find out how much difference there is in total cost to you. If you own it, then it’s your responsibility to take care of transportation, storage, and maintenance.
It’s important to think beyond just the initial purchase price when making comparisons. If you’re thinking about buying, you also need to consider depreciation and what the resale value may be when you decide to sell it.
Renting vs leasing – what are the differences?
Renting typically offers the most flexibility, but can wind up costing the most. When you rent, the rental company takes care of everything except actually running the machine.
Rental companies handle transporting equipment to the job site and picking it up when the job is finished. And of course, they take care of all maintenance and repairs.
You can usually get rates for daily, weekly, or monthly use, so you’re never actually paying for equipment that’s just sitting there unused.
Rental companies will generally have a good inventory to choose from, and most reputable companies will offer the latest makes and models available.
Leasing tends to combine a few benefits from both buying and renting. When you lease to own, it costs less upfront and doesn’t tie up your working capital in the same way buying does.
You also get the option of periodically updating to a newer model. Some leasing companies will even allow you to skip payments during your slowest months.
On the downside, if you need to break your lease early, there are usually huge penalties involved, and sometimes additional fees are charged for any equipment damage or wear and tear.
The Bottom Line…
In most cases, no single option will be right for you all the time to meet the equipment needs of your company. The size of your construction company and the consistency of your workload plays a big part in deciding how much equipment it makes sense to own, and which pieces it makes more sense to just rent or lease.
RELATED ARTICLE: Time and Cost-Saving Using Materials FinancingBack to blog