Rent vs Buy: Which Is the Best Equipment Investment?

When you start your contracting business, you have to make some practical decisions about purchasing or renting equipment. With these tips, you can make a useful long-term investment for your business.

What Is the Cost to Rent vs Buy?

The first aspect you want to determine is cost, since what you pay matters a great deal for your bottom line. If you don’t have a lot of experience buying or renting equipment, you might not know how much it costs. Do some research into the best brands for the kind of contracting you do. In some cases, it might be only a little more to buy than rent. Bear in mind that the equipment that you purchase may not be the same quality as the kind you can rent. With rental equipment, you have to pay attention to the kind of maintenance and repairs that the rental business performs. However, renting equipment might also allow you to gain access to equipment that is rated better than the equipment you can afford to buy.

Can I Afford to Finance a Large Purchase?

One of the first things that you learn as the owner of a business is that cashflow is king. You really need to keep money flowing in and out of your business. Finding out your ability to qualify for credit to finance the purchase of expensive equipment is only the first part of its affordability. You also need to be able to make all of your other payments (including payroll for you and your employees, if you’ve hired any), along with the equipment payment. In some cases, it may make more sense to rent at first and then buy once you have a higher amount of predictable income.

Will I Use the Equipment Regularly?

Every dollar that you spend for your business is an investment, and hopefully, it will be a successful one. This means that you have to ask yourself about the practicality of every expense, including the decision to purchase or rent equipment. If you know that you will use an item regularly, figure out how many uses it will take before you have justified buying it instead of renting. Just divide the cost of buying by the expense of renting it each time. Factor in the frequency at which you need the equipment, to get a sense of how many months or years it takes to justify buying. With this system, you might decide to buy some equipment and rent others, especially at first.

Can I Store and Maintain the Equipment Myself?

When you own a piece of equipment, you need to be able to take care of it. This involves maintenance and repair, but also storage. If you have plenty of warehouse space or a yard to keep equipment, this might not be a problem at all. You may be able to hire professionals to come provide maintenance for the equipment. It’s an added expense you don’t have with renting, but it may also qualify as a tax deduction. However, if you have nowhere to put it in the first place, renting might be easiest simply because you can return it to the rental company when you’re done.

Are Rentals Accessible When I Need Them?

Decades ago, contractors had little choice but to buy the equipment they used. The rental industry was nowhere near as strong as it is now. However, your ability to rent the equipment you need on-demand depends heavily on the region, as well as the time of year. Find out about the rental industry in your area, and what you can expect during the busy season. If you worry that certain types of equipment will be in heavy demand when you need them most, you might be better off buying them to use anytime.

Before you can start working as a contractor, you have to decide whether you will buy or rent the equipment. By answering these questions, you have a better understanding of the benefits of either side, and how to make a choice that works best for your business. To learn more about safe and effective operation of construction equipment, as well as the licenses needed to operate them, visit CSLS today!