Is Renting or Buying Construction Equipment More Cost Effective?
If you're an owner or manager of a construction company, one of the many tough decisions you've likely faced over the years is the decision of whether to rent or buy your construction equipment.
Understand Your Construction Equipment Needs
Before you can decide whether to rent or buy your construction equipment, it's important to weigh the pros and cons and to consider all the important variables that make a difference in this kind of decision. How often you need a piece of equipment plays a role in whether it's better to rent or buy. In addition, there are budget and cash flow considerations, tax savings, transportation considerations, and others. Here's what you need to understand.
Company/Project Needs
How often do you need the equipment? If your business uses certain pieces of equipment for 90% of your construction work, then renting may be prohibitively expensive. The cost of renting may come to more than the cost of buying, over time.
However, if your company only uses the piece of equipment occasionally, purchasing the equipment may bring more trouble than the equipment is worth. Sometimes, it's not clear how often a company uses a piece of equipment.
For construction companies that have many projects going on at once throughout the year, it's important to assess costs - the cost of continuing to rent versus buying - before deciding whether to continue renting or to purchase.
Budget, Cash Flow & Interest Rates
Sometimes, buying a piece of equipment is out of reach for small-time construction firms. Many companies don't have the cash on hand to simply purchase a large piece of construction equipment outright. Instead, these companies must borrow money to make large purchases.
Purchasing in this manner only makes sense for companies that can get a loan with a fair and affordable interest rate. At times when borrowing is expensive and interest rates are high, renting is more cost-effective and more realistic.
Tax Savings
Rental expenses are deductible as business expenses, while buying equipment is more complex. Equipment purchases are capital expenses that are amortized or can depreciate over the life of the equipment.
For guidance about how to handle this type of tax deduction, and to find out whether the tax savings are better to simply rent the equipment or purchase equipment outright, businesses should work with their accountant.
Transportation & Logistics
Often, just getting a piece of equipment to a job site can be complicated, especially for busy construction businesses. Driving a piece of equipment to the location and setting it up can take time away from the construction team.
For larger companies, the logistics of this aspect of equipment ownership is not a big deal. However, for small construction teams, managing the equipment and delivering it to the job site can be expensive.
Repairs
One of the more challenging aspects of owning a large piece of construction equipment is the repair and maintenance of that equipment. Some construction companies employ teams of people who can handle equipment maintenance, however, many smaller companies find the maintenance of this equipment just as challenging as the transportation and logistics.
Renting makes equipment maintenance easy because it's up to the rental company to keep the equipment clean, well-oiled, and in good repair. When equipment breaks down on the job, it's up to the rental company to either repair it on the spot or replace the equipment with a comparable model, while they perform repairs to the broken piece of equipment.
Using Rental Equipment to Test Drive New Equipment
Some construction companies rent before they buy as a way of testing certain pieces of equipment in a real-world setting. Testing a piece of rental equipment before making the purchase can help your construction company decide whether renting vs buying construction equipment is better.
Some companies choose to buy after renting a piece of equipment for a while because their experiences with the equipment are positive overall.
However, some companies choose to wait, assuming that future models of the same equipment will be a better investment.
Advantages of Renting Construction Equipment
Are you having a hard time deciding whether to rent or buy a piece of construction equipment? Below are the advantages of renting construction equipment:
- A much smaller financial commitment. Unlike the purchase of large equipment, renting represents a relatively small expense that's easy for many small construction companies to make.
- No maintenance or repair. The company that owns the equipment is the company that maintains it. For a construction company just renting a piece of equipment, there's no need to maintain the equipment. This saves the construction company time and money.
- Flexibility. Renting equipment instead of buying allows construction companies to change the type of equipment they're using for construction tasks as new models become available.
- Logistics are handled by the rental company. Construction companies renting their equipment need not worry about getting their equipment to the job site: it's handled by the rental company.
Advantages of Buying Construction Equipment
For large construction firms that perform a high volume of jobs each year, owning construction equipment is practical. Whereas renting involves an ongoing expense, buying construction equipment can be cost-effective, if the equipment is in constant use throughout the year.
Is Renting or Buying Construction Equipment More Cost-Effective?
Not sure whether renting or buying construction equipment is more practical for your company? Bracing Systems rents scaffolding equipment, construction equipment, mortar and cement mixers, mast climber scaffolding, and more. We have answers to your construction rental questions and can help you decide whether renting vs buying construction equipment makes sense for your company.
We're a trusted source for construction rentals of all kinds in the Chicagoland area. Call Bracing Systems today to get started with your construction rental order.
We understand your challenge: To get all your equipment and supplies reliably and on time, while maintaining good profit margins.
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