August 22nd, 2013
And the debate continues
is it better to buy or lease? In the case of heavy machinery, we think that it is better to rent. While one should evaluate their own unique circumstances, renting is typically lower-risk, lower-cost, and lower-stress than owning. Below are our top three reasons why.
With renting, one doesnt need to pay for the equipments insurance, its taxes, or its staffing. Insurance and taxes can be quite expensive because of the machines high value. Rental companies typically cover these costs, making it most cost-effective for one to rent.
That being said, the biggest overhead expense is often times staffing. When owning equipment, one needs to either outsource or hire a mechanic to perform routine maintenance, fix potential breakdowns and sometimes perform a complete an overhaul. Once equipment is purchased, the owner also needs to outsource or hire a qualified truck driver to move the equipment to where it is needed (not to mention purchase a truck and trailer).
Finally, one will also need to think about storage costs associated with equipment not in use. Depending on the type of equipment one needs and the climate in which one operates, it may be necessary to house the equipment in a storage facility or warehouse. Again, this cost is eliminated when renting.
2. Operating Costs
Operating costs are another main reason people choose to rent heavy equipment. With renting, one doesnt have to worry about the wear of the tires, regularly changing the oil, or keeping up with other routine maintenance. One would have to use a specific piece of equipment for a large amount of time in order to break even with all of these operating costs. Given the diverse nature of projects most companies take on, it seems unlikely that the equipment would be used enough to justify its purchase.
3. Risk Elimination
Many contractors and users of heavy machinery cannot accurately predict how much theyll use a specific piece of equipment. Renting allows one to pay for the equipment only when he is actually using it. With the unpredictably of the economy and future construction jobs, we think it makes the most sense to rent on an as-need basis, instead of purchasing and paying for equipment you may or may not use regularly in the future.
Another decision that equipment buyers face is whether to buy new or used. New equipment depreciates quickly resulting in a financial hit for the owner. However, if one buys used, he risks buying machinery that may not function correctly or consistently. Renting eliminates the risk of being responsible for faulty equipment and eliminates the financial risk of buying new.