Should a Construction Company Buy or Rent Equipment?
Determining whether to buy or rent construction equipment is a major process that should be considered carefully. Before deciding which route to take, you'll have to analyze your project needs and business expenses, factor in depreciation and resale value and figure out how often you'll be using the equipment. These factors will vary greatly depending on your business, project, location and budget, so take your time and consider your personal situation before committing to renting or buying.
Here are a few more factors to take into account that might aid your decision-making process.
Benefits of Renting
In many instances, renting has become a viable option for companies, allowing them to cut costs and establish financial stability. And the rental market is only expected to grow, projected to increase by four percent in the next four years.
One of the biggest benefits of renting equipment is dodging the initial purchase cost. New construction equipment can be extremely costly and take a toll on any company's budget. Renting or leasing equipment allows workers to pay in small increments and funnel their other money into more time-sensitive projects.
Renting will also save you from forming a long-term maintenance plan. Instead of caring for the equipment for the entirety of its life, you'll have to bother with repairs and maintenance only if something goes wrong, and possibly not even then. If you rent from a reputable company, odds are you won't have to invest much in repairs because the equipment will already be in good condition. Even if a rental machine does break down, many rental companies will cover repairs.
Moreover, you won't have to stress about depreciation and recovering the cost of your purchase. Renting takes the worry out of reselling and regular upkeep.
When it comes to large-scale projects, the advantages go well beyond financial aspects. Renting allows engineers, workers and project managers to choose from a wide selection of vehicles and equipment that serve specific purposes. In turn, this availability makes micromanaging and logistics much simpler and more organized. It also gives companies access to brand new technology without the big price tag, which may improve efficiency and productivity.
Benefits of Buying
Sometimes, however, it's smarter to buy than rent construction equipment. A general rule of thumb is, if you use the equipment more than 60% to 70% of the time, you should consider purchasing it. When renting a machine costs more than simply buying it, that's when you'll know it's time to buy. Consider it an investment in your company's future — you need this equipment to complete much of your work, which will produce revenue in the end that will offset the initial cost of new gear.
Additionally, if the new equipment is versatile and you can use it for multiple purposes in different job sites, it may make more sense to buy than rent. If you do and one of your fleet vehicles later needs to be repaired or retired, you'll always have a backup, which will allow your team to continue working on a project and avoid detrimental schedule disruptions. You may not even need to purchase an additional vehicle to replace the retired one if your new equipment can complete the job in its place.
While purchasing new equipment may be expensive, it will give you the chance to resell and recoup some of your money. The key to maintaining high resale value is regular upkeep, inspections and prompt repairs. Storing your equipment is also imperative to preserving its quality and value. Of course, storage does entail additional costs, but if you were renting, you wouldn't recoup any money spent on rental payments. Purchasing the equipment will give you a chance of recovering some money.
Other Options
Renting used and buying new aren't the only options to consider. You can also purchase used equipment that's at or below your budget's limit to save on initial costs. This course will also allow you to receive a machine with a stabilized value, increasing your chances of recouping most of your initial investment as long as you keep the machine well-maintained. Saving repair, inspection and maintenance receipts can also increase resale value.
Leasing to buy is another viable option that will allow you to try out new equipment and apply your rental payments to the purchase price if you decide to buy. With leasing, you'll avoid the risk of committing to equipment that doesn't suit your needs as well as you thought it might. In this case, you can simply return the machine and search for something better.
Finally, remember that a combination or rentals and purchases has its benefits. Weigh your options and make an informed decision that you can be confident about.
Author Bio: Emily is a green tech writer who covers topics in renewable energy and sustainable design. You can read more of her work on her blog, Conservation Folks.
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