There are many factors to consider before you decide to rent, buy or lease your company’s construction equipment. It’s an important investment since every job depends on your company having the right equipment. When you are trying to decide, think about your budget and how often you will use the equipment. Here are some of the advantages and disadvantages associated with buying, renting or leasing construction equipment.
Buying your own construction equipment gives you the ultimate amount of control. You can access the equipment at any time and you won’t have to worry about keeping it in pristine condition like if you would if you leased it. You can also list the equipment as an asset in your company’s financial records.
However, there are disadvantages to buying construction equipment. You will have full maintenance responsibility. Storage costs and repair costs will also add up over time. Since most equipment will depreciate over time, you should also think about its potential resale value in the future. If you don’t think you will have the time to maintain the equipment, you may want to consider renting or leasing it.
Renting is usually the best choice if you know you will only need the equipment for a limited amount of time or just a few times a year. Many companies choose this flexible option since it gives them access to different equipment brands. You can try a variety of equipment before deciding which ones you would like to buy later. Another benefit is that you won’t have to worry about maintaining the equipment since the company who owns it is responsible for maintenance.
When you rent construction equipment you are expected to pay based on how long it is in use (typically you will pay a day, week or monthly rate). A major disadvantage of renting equipment is that it is more expensive than leasing.
Leasing is considered the best of both worlds in the construction industry. If you don’t want to invest in purchasing equipment upfront but know that you will need it longer than just a month or two, you may want to consider leasing the equipment. Many companies offer lease options for a year or longer.
One benefit of leasing equipment is that you can have access to the latest tools and equipment on the market. Depending on the leasing company, you may also be able to arrange financing with very favorable terms.
However, there are also disadvantages to leasing construction equipment. For example, you will probably have to pay higher interest and insurance rates. You are also locked into a solid contract, so you can’t break it without paying a fine. You may also have to pay additional penalties if you damage the equipment before the end of the lease.
Regardless if you choose to rent, lease or buy, it’s important for you to make a decision that will benefit your company. Renting is usually the best option if you know you will only need the equipment for a limited amount of time or just a few times during the year. Buying equipment makes sense if you know you will use the equipment fairly regularly and have the capital. Meanwhile leasing is a nice choice if you want to try the latest equipment before making a purchase.
If you still aren’t sure which option is best for you, talk with your accountant or Chief Financial Officer. They can help guide you towards making a decision that is the most cost-effective and aligns with your company’s overall strategy. Many companies decide to try all three options until they figure out the best arrangement for their business.