Equipment Rentals: Pros and Cons
Equipment can make or break a construction business. In order to remain competitive and profitable, you must decide if buying or renting is the best option. Before you make a decision, you should consider the following factors.
Buying equipment has its ups and downs, but if you need it for long-term projects or to use on multiple job sites, it may make sense long term. However, buying equipment can cost thousands if not hundreds of thousands of dollars. Consider the following when you purchase equipment.
- Cash Flow. When you are purchasing new equipment the health of your cash flow should be a major consideration. Buying equipment involves using your cash reserves or credit line. So, you will need to analyze your upcoming needs and finance options before committing.
- Costs of Ownership. Most likely, you will need to maintain the equipment. Do you have staff for this or is it an additional cost of the purchase? Do you have storage space or do you need to rent a building to house the equipment while you are not using it?
- Depreciation. Expensive construction equipment can sit idle for long periods of time between projects. As it sits and as it is used, it depreciates quickly. The trade-in or resale value of larger equipment falls in tandem with this depreciation. How much money are you losing when you pick it up from the dealer and can you recoup that cost in a sale?
From a logistical and financial perspective, renting equipment makes sense as the equipment may only be used for one job or for a limited amount of time. In some cases, this is the better option but consider the following when making your equipment rental purchase.
- Small Up-Front Cost. When you rent equipment, you do not have to invest in the equipment, you invest in the job. Typically, you can add these costs to your estimate and it would not push your budget as high as it would if you were including the purchase of new equipment.
- No Maintenance Cost. When you rent equipment, you do not have to worry about long-term maintenance costs. This reduces your overall expenses and allows you to rent the equipment as needed.
- No Storage. When you rent equipment for a job, you typically do not need to store it in between uses. This may be different for larger equipment but typically you use it then return the equipment between jobs.
- Deliveries. Typically, when you rent equipment it can be delivered to your job site so there is no need for larger trucks or teams to pick up the rental equipment. The rentee takes care of this for you. Just order, use, and return.
- Damages. When you rent equipment you have to be more careful and take care of the equipment because if you damage it before it is returned, the rentee may impose a fee for the damaged good.
All in all, renting equipment is a better way to work since it removes budget liability from your proposals and gives you more ability to complete a job, especially if you are a smaller company and you want to compete with much larger companies.
If you choose to buy or rent equipment, just consider the cost vs the income generated by the equipment and make an informed decision. We can help you make that decision. Just give us a call 1-800-800-6011 or contact us online here. We have a wide selection of equipment rentals and would be happy to give you a quote on your next project.