If you go to resell your equipment in the future, you could find that the value isn’t there anymore. You might have to sell at a price that’s much lower than anticipated, which could be bad news for your budget.
The cost of depreciation can also have an unexpected effect on your construction company’s taxes. Your business could encounter additional financial losses and have trouble recovering your original investment.
In contrast, when you rent, you can set aside any worry about depreciation. This figure doesn’t apply to rentals. Instead, your company can deduct rental payments as business expenses. This can amount to additional savings for your company.
In addition, banks and other creditors tend to consider major equipment purchases as liabilities. However, they don’t view rentals this way. That means renting equipment won’t harm your ability to borrow funds for land, property, or other business purposes. Renting also won’t impact your business’s credit rating nearly as much as a major purchase would.
Insurance and Maintenance Costs
The cost of buying and owning equipment can be significant. As you’ll quickly learn, this is far from the only cost your company should budget for.
When you own, the cost of insurance can be huge. You have to insure each machine for theft and damage. If your company is on the small side, you might not have much negotiation power with your insurance company. This can mean high premiums and added cost.
When you buy equipment, you also have to pay to maintain it. This can include annual tuneups as well as unplanned repairs.
In fact, it can include any number of issues and expenses. If your machinery breaks down often or if you have a large inventory, the costs can add up quickly.
In contrast, when you rent skid steers and backhoes, you don’t have to pay these extra costs. Instead of charging insurance and maintenance separately, most rental companies include these costs as part of a package rate. Maintenance and insurance aren’t free, but you can get them at a steep discount from your rental company.
Some companies train their teams to do tuneups to save money on maintaining owned equipment. When you rent, however, you don’t have to worry about doing maintenance yourself. Instead, you can leave this job to the pros.
Rental companies usually handle all repairs and maintenance in-house. That means your team can take tuneups off their to-do lists.
Storage and Transportation Issues
When you work in construction, logistics can be a constant struggle. From keeping jobs on schedule to securing the right permits, each job has tons of moving parts. Most contractors don’t need yet another issue to deal with.
However, when you own machinery, you’ll have to handle those logistics, too. Moving equipment from one job to the next isn’t easy. Depending on the size, you may have to rent tractor-trailers and even get wide load permits. You’ll also have to pay personnel for loading and offloading equipment. All of this takes extra time, money, and planning.
Finishing a big job is a good feeling. But if you have to arrange to move machinery from the project site, the extra work can be a headache. When you own, you’ll also have to store your equipment. If you don’t have room for storage, you may have to pay to rent secure warehouse space to keep machinery safe and out of the elements.
Keep in mind that not just any storage spot will do. If you spend thousands of dollars on construction equipment, you need high-quality storage to keep your property in optimal shape.
If all of this sounds like a hassle, you should consider renting equipment instead. Rental companies typically include the cost of transportation and storage in your monthly rate. That means you already know how much to budget before you even start the project. You won’t rack up surprise fees for storage or transportation.
In addition, rental companies handle the logistics for you. You don’t have to track down a tractor-trailer or find a storage location because it’s already under control. Just specify the right start and end dates for your rental, and the company will deliver and pick up the equipment right on time.