03/02/2020
SHOULD YOU RENT OR BUY YOUR NEXT PIECE?
One of the most important questions that permeates through the construction industry, regardless of geography or size of outfit, is how to acquire the right fleet for the job at hand. It boils down to whether you want to rent equipment or buy it outright and there are quite a few factors that should be considered when making this decision. Let’s explore the ever present conundrum of renting vs. buying.
Pros of Renting
The best part of going down the rental route is that it gives you OPTIONS. Rental companies have a large amount fleet available which is especially helpful when you have a job that will require multiple pieces of equipment that have different functions (i.e. jobsite needs a forklift, mini excavator, and roller). Rental companies can fulfill multi-unit orders and offer different sizing options (scissor lifts from 19’ to 40’) that will further fit your job better.
Pros of Buying
Buying is an excellent option if you are someone who wants a piece of equipment to be ready and available right when they need. Once you buy, you decide where that unit is used, how it is used, and what schedule it will be on. In a sense, you aren’t only purchasing a machine, you are also purchasing CONTROL.
Another great advantage of purchasing equipment is the excellent tax breaks offered. Section 179 of the tax code allows up to a $1,040,000 write off in 2020 which can equal huge savings toward your purchase. For example if you purchase a $100,000 unit you stand to shave $35,000 in tax savings.
Cons of Renting
This one is probably obvious but rentals are not cheap and the less time you rent, the higher the cost. A typical 19’ scissor lift will rent for about $200 a day while you could ultimately purchase a used one for about $5000, you do the math but end the end rentals are costly.
You are also at the mercy of a rental company when they are delivering, servicing, and picking up the equipment. They are often very timely but things happen and you could be on the hook for a lot of lost time if things don’t go your way.
Cons of Buying
The biggest drawback to ownership is maintenance costs, plain and simple though. Parts are hard to find, labor isn’t cheap, and you might not have a replacement unit on hand. Warranty and service options should always be a considered when purchasing.
Owning your own equipment will take considerable investment upfront. A run of the mill 6000lb. telehandler can cost up to $50,000 in some markets so you have to be ready to really “fork it over” on the front end. I always advise anyone I’m working with to explore financing options as they can really help alleviate the initial investment and usually only charge about 3% interest.
In the end, everyone has different factors that impact their bottom line and need to engage in the dreaded word ANALYSIS to help make the best decision. Most rental companies should offer a rental vs. buy analysis they can tailor to your past rental and utilization behavior or a contractor to similar you.
Call me at (901) 691-6972 for a free, deep dive to answer if you should RENT OR BUY
This 2020 Section 179 Deduction Calculator will instantly showhow much money you can save when you buy, lease or finance equipment this year