Whether you're just starting your own construction or home improvement business or you have been established for many years, one of the biggest expenses you will face is maintaining your equipment. Keeping your costs down is a big concern, and you may not be sure whether renting the equipment or purchasing it is the better option.
If you are in the market for construction equipment, here are a few points to consider before you rent or make a purchase.
Can You Afford to Purchase the Equipment?
The biggest consideration should be your present financial situation and whether you can afford to purchase construction equipment. The cost of certain types of heavy equipment often makes purchasing them outright impractical. Renting is typically more cost effective, and it allows you to utilize the equipment only when it is needed. The rental company is also responsible for maintenance, which is another expense to consider.
Also, if you purchase equipment and cannot stay current on the payments, it will negatively impact your credit. If your company expands in the future and purchasing becomes feasible, past mistakes can make this difficult.
How Often Will You Utilize the Equipment?
Contractors and construction companies utilize a variety of equipment based upon their job. The amount of time you require a piece of equipment is called its utilization rate. Keep this rate in mind when determining whether it makes more sense to rent or purchase a piece of equipment. The simplest way to determine your equipment's utilization rate is to consider how many days a month or year you use the equipment, versus how many days a month or year you are on the job.
According to Karmak, the target utilization rate for construction equipment is 55 percent. If the utilization rates are lower than 55 percent, renting the equipment makes more sense. However, if you utilize the equipment often, and the cost of renting each piece is comparable to the cost of purchasing the unit, purchasing the equipment might be the better choice.
What Is the Cost of Owning the Equipment Versus the Cost of Renting the Equipment?
When you are considering the cost of purchasing equipment, you must also keep in mind how much it will cost to maintain the unit over the next few years. This includes any potential maintenance costs, repair costs, and the cost of replacing the equipment if it is severely damaged.
Measure this cost against the cost of renting the equipment. Remember, you will not need to perform major repairs on rented construction equipment.
Consider the cost of insurance on purchased equipment versus the cost of insurance on rented equipment as well. If you rent equipment, you will only require insurance for the time the equipment is in your possession. Owning the equipment means maintaining the insurance for a longer period.
Can You Afford to Store the Equipment?
Finally, if you purchase construction equipment, you will need to rent or purchase a facility to house each piece. Depending on the size and number of pieces in your possession, the rental facility costs can add up quickly. Renting the equipment reduces the cost of storing the equipment. Additionally, if you only require the equipment for a short period, such as a single day or week, you may be able to store the equipment safely on the job site.
The decision of whether to purchase or rent a piece of construction equipment is complicated, and there are several factors to consider, including the utilization rate and the overall cost of ownership. For many contractors and business owners, renting light equipment, heavy equipment, or even tools makes more financial sense. Contact a company that offers equipment rental services to learn more.