01 October 2019

Renting Heavy Equipment Could be Better Than Buying It!

It can be tempting to look at the purchase of new construction equipment as an investment for your company. The reality of buying new heavy machinery isn't straightforward at all. Renting construction equipment on a long-term basis has some major financial and operational advantages that often go overlooked.

Buying heavy equipment will cost a company more than the purchase price. With use, the value of a piece of machinery will drop, and your company will be responsible for insuring and maintaining it as well. Putting money into a piece of heavy equipment might seem like a smart move, but there are numerous factors to consider.

Renting heavy equipment removes major financial burdens from your company. It is almost unheard of for construction equipment to rise in value as it grows older and is used for commercial construction and the money that is put toward buying it, maintaining it, and insuring it could be used to put your company in a stronger financial position.

Financial Advantages of Equipment Rental

Once your company decides to sink capital into heavy equipment, it will be locked-up until the equipment is sold. That means that not only will your company have to spend a comparatively large amount to buy the equipment outright (vs. renting it), it will continue to delegate cash to the upkeep of the machine, just to maximize its value over time.

If your company is using debt to finance the purchase of heavy equipment, it may not be a better solution. Not only would the company be taking on a fixed debt (for an uncertain return), it would also have to deal with all the costs associated with the new machine. This can extend to hiring specialized maintenance personnel, or entering into a service contract with specialized mechanics.

Long-Term rental of heavy equipment addresses many of the issues that equipment buyers face.

Heavy equipment rental companies have dedicated maintenance staff, and will generally roll the cost of keeping the equipment in good working order into the rental agreement. There won't be any guesswork when it comes to knowing how much the equipment is actually going to cost on a monthly or quarterly basis, which isn't the case when a company owns it directly.

Stay Up and Running

Depending on how a rental agreement is structured, your company may also be able to negotiate a replacement clause that would eliminate the chance of prolonged downtime due to equipment failure, or guarantee compensation to you and the third-party client that your company needs to service.

For SMEs that need to secure the use of heavy machinery, the insurance aspect of owning equipment is worth researching. Larger companies will have more leverage with insurance companies when it comes to negotiating rates, but smaller companies will have far less.

Renting heavy machinery from a professional equipment rental company will give your business the ability to benefit from both skilled professionals and trade advantages that would be nearly impossible to realize in any other way.

Logistical Concerns Matter

If you have ever had to manage the logistics around a construction site, you understand the time and professional relationships involved. Once your company buys a piece of heavy machinery, it will have to deal with moving it around whenever work needs to be done away from the equipment is stored.

At the very least, this means creating relationships with a company that has the specialized vehicles needed to haul your company's equipment around. Buying more equipment for logistics means more maintenance costs, more insurance, and yes, more personnel.

All of these payments will eat into your capital base, and create a drag on profits. Don't forget that covering fixed costs, debt repayments and payroll are what allows a business to keep going. Making sure you can move equipment around shouldn't be a hindrance to using your machinery, but if the costs and nuances of logistics are overlooked, they could end up being problematic in the long run.

The money spent to own heavy machinery can add up quickly.

Doing research on the cost savings that renting heavy equipment can create is a smart idea for any company, especially if yours is an SME that doesn't have access to ultra-cheap lines of credit, loads of low-cost storage space, or bargaining room with your insurance providers. Make sure you get the most for your money and stay as flexible as possible in a changing economy.