Careful management of equipment needs is critical if contractors are to remain profitable and competitive. Part of that process involves deciding whether to buy or rent construction equipment. Before making a decision, you may wish to consider the following factors.
Look at the Costs of Buying Equipment
The health of your cash flow should be a major consideration before you buy equipment. Since buying equipment involves dipping into your cash reserves or line of credit, you’ll want to analyze your company’s upcoming cash needs and financing options before committing to a purchase. You’ll also need to consider other costs of ownership, such as paying for maintenance and for storage space for your purchased equipment. It’s important to recognize also that many expensive pieces of construction equipment may sit idle for long periods between projects. Also, the value of construction-related equipment can depreciate quickly, and its trade-in or resale value can fall in tandem.
Weigh the Benefits of Short-term Rentals
Renting particular pieces of equipment as they are needed for a specific job may make sense from a financial and logistical perspective. With a rental, you do not have to make a large, up-front payment and erode your cash reserves. Since maintenance is included in the price of the rental, you won’t face the costs related to keeping the equipment in working order. Typically, the rental company will pay for needed repairs and replace the equipment if it breaks down. In addition, you won’t have to pay to store rental equipment nor will you incur any expenses transporting the equipment since it is usually delivered straight to your jobsites.
Renting gives you a degree of flexibility that you might not enjoy with a purchase. For example, you rent equipment only when you need it for a particular job. Moreover, renting may allow you to bid on a broader range of jobs because you are not limited by the equipment you own. And since you know up front the cost of renting a particular piece of equipment for a specific job, you can add some or all of the cost of the rental to your job quote.
