How to determine which of your construction equipment needs are most cost-effective to rent. There was a time when buying equipment was the only option. Sure, you can finance the purchase or lease the machine, but generally you end up owning it. This is no longer the case.
So which is the better path: buying or renting? Actually, they’re both smart choices, depending on your situation. Start by considering these five questions:
- How is your financial situation? You should consider buying (or financing a purchase) if you want to build equity and benefit from depreciation. When you sell owned equipment, you’ll also see a return on your investment. Renting is another option if you don’t want to make an upfront financial commitment or want to delegate some of the operating costs.
- When and how will you use the equipment? Purchasing machines, tools, or attachments that you plan to use day in and day out, project after project, is often a good investment. Renting is more appropriate if you only need equipment for a short period, or if it is a specialty tool you are unlikely to use again. As a general rule, renting when the planned use is below 40% and buying when it’s above 65% is a good idea. If you’re in the middle, consider other factors.
- How familiar are you with the equipment? It’s likely that you know how to operate the machine you’re replacing or what benefits it offers. This gives you confidence in your purchase. Nonetheless, if it’s a new kind of equipment or a new technology to you, renting lets you “try before you buy.” In that case, you don’t have to invest in a product that might not work for you.
- Would you be willing to do maintenance and repairs? When you buy equipment, you are responsible for maintaining and repairing it, which means you either need to take on those tasks yourself, hire someone to do the work or pay a third party to handle them. Rental providers handle maintenance and repairs. You won’t get this for free, though. These costs will be bundled into your rental payment.
- What is the longest distance you will have to travel for a project? Will you be juggling multiple projects simultaneously? When you own a business that has a physical presence in or near these locations, you have a place to store and maintain any equipment you buy. You can avoid wasting money on storage space and moving equipment between locations if you rent equipment instead.
There is no right or wrong answer to the “buy or rent” debate. Business is about your priorities, how you work, and how you want to run your company. There are many contractors who have combined both approaches to success.