Rent vs. own
26 August 2014
Making the right decision for your business doesn’t come easy. With ample research and crunching numbers, we find that making the right decision – that will ultimately save versus waste time and money – can be tricky. So, when it comes to construction equipment, do you prefer renting or owning?
The trend over the past several years has increasingly leaned toward renting construction equipment. Especially during the recent recession, many consumers found cost benefits in renting versus owning. I’d like to dive in to weigh out the cost benefits of each.
Whether you are the distributer, rental agency or contractor, there are many questions you should ask yourself before renting or purchasing any construction equipment. Things to consider: What type of project, length of time, cost of fuel, cost of maintenance, will you utilize the equipment for later use, what is the resale value when purchasing, etc. If you are using the equipment less than 60 percent of the time, renting is your best option.
When taking into consideration the overall cost of purchasing and owning equipment, you’re at risk for higher costs due to overall maintenance; repairs and downtime cost money, transporting to a job and government compliance are all additional costs. This is why, if you are planning on purchasing equipment, it’s important to take into consideration new Tier 4 engines.
Tier 4 is already in government compliance and can reduce fuel costs over a period of time. But, something to keep in mind about new Tier 4 engines is they cost more due to engine design, build and installation, government requirements, as well as fuel and fluid costs. However, the new Tier 4 engines use less fuel and take diesel, which overall costs less.
So, how do you calculate whether or not owning is the right decision for you? A simple formula can be applied when considering the purchase of construction equipment; the cost of the equipment over the number of years you will keep it. Essentially, you are paying for every hour you have the equipment in your possession, whether or not they are in use. If you think your equipment will spend most of its time sitting on a lot, then you should consider renting.
Renting equipment can be beneficial over purchasing because you are eliminating many financial risks associated with ownership. Not only are you not responsible for maintenance and costs associated with financing, but you can also keep up with industry trends by renting the latest technology, such as Tier 4. And when renting equipment from a rental company, costs are usually lower because the company purchases equipment in bulk, allowing consumers to rent at a lower rate. This is beneficial when a project requires specific equipment because fleets are usually in stock. Rental companies often have easy access to what’s available online, and a consumer has access to inventory through online stores. This helps keep track of what’s in stock and availability for your specific project. You can rent in advance so you are guaranteed the equipment at the time of your project.
We all know how hard it is to stay on a budget. But when you’re dealing with construction projects, many factors play a role in purchasing and renting decisions. The best bet is to sit down with your finance department and weigh out the options. Remember, buying is a great decision if you are going to be using the equipment up to 60-65 percent of all projects. But, if your equipment is going to sit on a lot, you’re better off renting equipment as needed. Also, by renting Tier 4 engines with lower emissions, latest technology, and low risk, you are able to pick and choose from the rental fleet per project.