Should I Buy or Rent Machinery?

iStock_000003345380MediumMachinery and construction equipment are expensive. While the U.S. economy has taken a decidedly positive swing in recent months, not all businesses have the type of liquid financial assets or credit availability to purchase new or used machinery outright. Because credit markets are still a little tighter than most would like, a recent trend in renting machinery and equipment has seen a jump. But the real questions is, which is better for you and your company… buying or renting?

Renting Machinery
There are definite benefits to renting machinery and equipment. If the project you need the item for is more of a one-off or rarely requested service, renting is the obvious choice over purchasing simply due to infrequent use. Even longer term rentals can be beneficial as the per-day cost of items will generally decrease as the term of the rental increases. Rental also saves the large outlay of capital that buying requires. Rental fees can generally be deducted as business expenses come tax time ,and the insurance and maintenance costs are covered by the actual owner of the equipment. Not only to you avoid tying up large amounts of funds in the actual purchase, but you can save significant amounts on recurring costs as well.

Buying Machinery
Rental is great if your project is a one-time deal, but if you’re seriously looking to expand your business and take on larger contracts buying may be the way to go. For one, buying is a one-time expense. Yes, it’s a large expense, but if the machinery is going to be used frequently and allow you to take on enough new work it may be a drop in the bucket when compared to long term ROI. The repeat costs of rental can also begin to stack up if you use certain types of equipment frequently enough. You also have the ability to now claim the machinery as an asset and potentially generate some revenue of its own by renting out YOUR machinery during downtime, or reselling it should you need to upgrade to a newer or different model.

Buying Used Machinery – A Happy Middle?
If rental costs are getting a little too steep and that brand new backhoe is just out of reach, consider purchasing used machinery. The cost savings of gently used equipment can be substantial, and the lower purchase price can help you expand while still being mindful of your overall budget. For more info, see our previous posts on buying and selling used machinery and calculating the actual cost of any machinery purchase.

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3 comments

  1. I like the idea of renting a little more since you mentioned that the insurance and maintenance are covered by the owner of the machine. I work for a small company that doesn’t have a lot of room in the budget for ongoing costs like insuring more equipment than we already have. We’ll have to keep this in mind so we aren’t paying more than we need to for our projects!

  2. I agree with you- unless you are planning on doing consistent renovations, it is better to rent your equipment then buy it. I also thing that buying used machinery can be a good option, but at the same time you risk spending money on faulty equipment. In my experience, renting the equipment is the better option.

  3. Thank you for listing out some of the benefits of renting and buying certain machines. The benefits also come from the equipment being insured by the business you rent from. It can be nerve racking to use bigger equipment like a bobcat if there isn’t any insurance on the machine.

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