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Construction Equipment and Supplies Business Guide: Evaluating Whether to Rent or Lease Construction Equipment

When working on a construction project, you may need to decide if you want to purchase, rent, or lease a piece of equipment.  If you have a lot of money to invest, you may wish to purchase your own equipment. However, many small businesses don’t have that kind of money to spend on construction equipment and supplies. So, your better option in that case would be to rent or lease the equipment you need for a particular project.

Benefits

Traditionally, renting or leasing is what most companies do when they need a piece of construction equipment and don’t have large reserves of money for purchase.  Renting or leasing allows you to test construction equipment and supplies to see how you like the machines. This can be completed before you decide to purchase equipment, helping you decide on a long-term investment that will work best for your company.

Purchase

Purchasing equipment is beneficial for a company that has the money to spend. You won’t need to worry about returning equipment or paying monthly bills if it is purchased outright.

Renting

Renting is best used when a project will be short term. If you need a piece of equipment for only a few weeks or a month, rentals are your best choice.  Rental costs will depend on how long you keep the equipment and possibly on the gas or miles used.

Leasing

Leasing is a good option for you if you intend to use the equipment long-term, but can’t afford to purchase the equipment outright. You will only need to worry about making a monthly payment for the use of the equipment.  You can also return the equipment if it becomes faulty, exchanging it for the working product.

Pitfalls                                                                 

Pitfalls of buying, renting or leasing construction equipment and supplies can be daunting. You may end up spending more than you wanted to if you decide on the wrong plan for your company.

Purchase

If you purchase equipment, you may be looking at a long-term investment that accrues interest, costing you more money. If you do not have projects frequently, this may not be the best choice for your company. Owning the equipment can be beneficial; however, if you damage it or it breaks down, you can’t rent or lease a new piece in its place.

Rental

Renting a piece of equipment can be costly. In the short term, the cost may not be much. For example, if you work for only one day, a $100 rental fee may be within your budget. However, if you run over and need the equipment longer, you may end up paying more than you expected, making it more worth your money to lease or purchase the item.

Leasing

Leasing equipment allows you to use any item you need for a fixed term. For example, your lease may be twelve months, and you’ll pay part of the lease balance each month for the construction equipment you need. However, if you do not have projects for that entire term, you essentially are losing money when the equipment is not in use.

Pricing

Leasing options for construction equipment and supplies are offered through banks and manufacturers. For example, John Deere and Caterpillar offer financing to help you lease and purchase a piece of equipment.  Banks offer approximately 60 percent of financing associated with construction equipment.  Ownerfinancing4u.com offers a variety of financing options, which have varying rates. Some loans for purchasing have terms as low as 24 months. Loans can be upwards of $750,000.

Because each of your projects varies, it can be difficult to describe the costs associated with construction equipment and supplies. If you rent, you may pay prices for a day or longer. Depending on the company, this price can vary dramatically. For example, the Division of Construction in California states that model 120G 87V from CAT rents at $62.15 per date of work. Other pieces of equipment vary.

In conclusion, you should first recognize your budget when you begin to look at construction equipment and supplies that you want to rent, lease, or purchase. If you have the means to purchase the equipment and are very busy, you may wish to do so. However, if you have few projects, buying the equipment won’t be worth your money. Renting is the perfect solution for one short-term project. You won’t spend much money for a day of use and you can return the equipment when you are done. Rental equipment is usually in good condition and you won’t need to worry about replacing it if it breaks down. Leasing may be your best option if you have a year or two of lined up projects, or if you want to test the item for a long-term purchase, or lease-to-own. Construction equipment and supplies can be costly if you choose the wrong option for your company, so it is best to understand your needs.