Making the Right Decision: Buying, Renting or Rent-to-Own Heavy Equipment
There is a lot to consider when thinking about your heavy equipment needs. Are you expanding your workload? Is it time to replace some worn out machinery? Or do you have a project coming up that requires specific type of equipment? Whether you decide to buy, rent or rent-to-own, it is important that you make the right purchase decision for your individual needs. There are pros and cons for whatever choice you make so it is important to think about what will be the right decision for your business both now and in the future.
It is important to consider your financial situation before making a decision on the best purchasing plan for you and your business. Think about what you will be using the equipment for, when your will be using it, where you will be using it and how long you will be using it for.
Take into consideration all costs that the equipment will incur. This should include taxes, servicing, repairs, transportation, fuel etc. Try and take into consideration costs over the following months and years to calculate the best purchasing option for you.
Take into consideration how long you will need the equipment for and how frequently you will be using it. Maybe you are replacing some equipment that you used a lot or the equipment is essential to your business and will be used every week. If this is the case, you should consider buying as this will be a better financial investment long-term.
If you only need the use of the equipment every now and again or you need it for one project and after that, it will get little use, renting may be a better option for you. Is it worth a big initial payout for a machine that you will only need for three years?
Skills and ability:
If you are needing equipment that you have little experience with, then buying something straight away is probably not for you. By renting or rent-to-buy; you will get more support with how to operate the equipment and the maintenance it will require. You can get an idea if this equipment is really necessary for your business needs.
On the other hand, if you have a good understanding and plenty of experience with the type of machinery needed, buying could be the option for you. You will already be aware of the maintenance and running costs of such machinery and will be more confident in buying used equipment.
✔ This is the best option if the equipment is essential to your business and will be used frequently over a long period of time.
✔ Good long-term investment. Get a return when you sell the equipment.
✔ Less expensive in the long-term.
✔ More convenient. The equipment is available whenever you need it.
✔ Tax savings/benefits when buying heavy equipment; speak to your financial advisor about tax returns on heavy equipment purchases
X Buying is only a good idea if you are in a financial position where you can afford a large one off payment.
X Big financial commitment and initial financial outlay and that shouldn’t be taken lightly.
X Buying used heavy equipment can be a big financial risk. Although it could be cheaper in the long term, you are also more likely to incur maintenance, repair and servicing costs, especially if you don’t check that the machinery is good working condition to begin with.
✔ Good solution if you only need the equipment short-term (3-5 years usually).
✔ Lower one-off initial payment.
✔ You will usually get the choice of the latest equipment. This is an affordable way for smaller companies to compete with bigger companies that can afford to buy the latest models.
✔ No maintenance or insurance costs.
✔ More support/service if there are any problems with the equipment.
✔ Little to no financial risk involved.
X Not a good long-term solution financially.
X If you know you will need to use the equipment frequently for a long period of time, costs towards rental will be much higher than the one off payment of buying.
X You don’t have as much control over the use of the equipment. If your project over-runs or there are unexpected problems; you won’t have a guaranteed use of the equipment 24/7.
✔ Become familiar with a piece of equipment before making a long-term financial commitment.
✔ If you think you will be using the heavy equipment long-term but want to make sure that it is the right make/model to purchase, buy-to-rent is a good option.
X There are many different rent-to-own options so make sure you know exactly what you are signing up for. It is always beneficial to speak to a financial advisor before considering a rent-to-own scheme.
X This is not the best choice from a financial perspective, depending on how much of the lease payments go towards the purchase of the equipment.
X If you decide not to buy, you will not get any return on the finance you have already paid out so, like renting, it could end up costing more than buying a piece of equipment straight out.