Although it can be a more affordable option in the short-term, renting construction equipment isn’t always your best choice. Depending on how much you plan on using your machinery, your rental options might not be cost-effective.
As a general rule, it’s typically better to lease the necessary hardware through an extended contract. Not only does this ensure the availability of equipment whenever it’s needed, but it also ultimately results in a better return-on-investment.
Advantages and Drawbacks of Renting
The market for construction equipment rentals has seen a significant boost over the past few years. Rental contracts for truck loaders rose by a whopping 925% between 2011 and 2014 alone, while the rental of wheel loaders soared by 273% in the same timeframe.
Such sharp increases can be traced back to numerous factors. With some construction hardware and vehicles costing tens or even hundreds of thousands of dollars, many companies — particularly startup enterprises and community-oriented ventures — simply don’t have the capital to invest in an outright purchase. Conversely, rental machinery can typically be rented for a few hundred dollars per week.
However, these costs accumulate over time. If you require a certain machine or vehicle for several weeks or months at a time, or if you find yourself constantly renting the same equipment to meet your needs, you could end up paying far more than the cost of a lease.
Benefits and Shortcomings of Leasing
Many strategies can be employed when making the choice between renting and leasing. By calculating your exact equipment usage, you can easily come to a conclusion. If you plan on using the hardware more than 40% of the time, leasing is the ideal option.
You can figure out your own usage by noting that 100% utilization is equal to roughly 22 days and adding or subtracting from there.
Professionals who decide to lease will enjoy numerous benefits. Since most dealers will let you exchange a tool or vehicle for a newer model as part of your lease, you’ll have easy access to updated technology and the latest innovations as they hit the market. This lets you maintain your competitiveness without having to invest capital that you may not have.
Leasing also spares you the added expenses of storing hardware during your downtime, performing routine maintenance on equipment and, in some cases, transporting equipment to and from the construction site. Such amenities are a common part of most leases today.
On the other hand, leaving these caveats up to the leasing company could result in unnecessary delays or issues when it comes to repairing broken machinery, replacing equipment and delivering hardware to the site on time.
There are also some significant repercussions to consider if you should default on your lease. Failure to pay your scheduled premiums could result in termination of the entire lease, repossession of the equipment in question and, in some cases, litigation over monetary damages.
You’ll also want to consider the length of the lease in question. Since many leases last for several years, it’s important that you’re able to forecast your future needs and objectives. Failure to do so in an effective or accurate manner could leave you paying for equipment you don’t need.
Making the Choice Between Renting and Leasing
Several factors need to be considered before deciding between a rental and a lease. Short-term projects are typically better suited to rental equipment, but those who plan on completing numerous jobs over the coming months or years can benefit greatly — both in terms of availability and cost-effectiveness — from an extended lease.