One of the biggest debates in the construction industry is whether to buy or rent heavy equipment. Budgeting, specifications of equipment, financial and risk management plans, and lifestyle cost analysis are all part of the buy vs. rent decision. You must understand, review, analyze to make the best decision for your company. Since this is something our customers struggle with, we want to offer some insights to help you answer this question. Let’s look at the important factors to consider when weighing whether to buy or rent equipment.
What are your Equipment Needs?
Generally, if you don’t use machinery more than 60% of the time, you may want to rent it. However, if your work rate exceeds this threshold, consider leasing and purchasing the construction equipment. Think about your future needs-if renting working equipment costs as much or more than purchasing it.
You should also think about whether there are costly consequences for not having the right equipment immediately available. If the equipment is used on many types of jobs, it makes more sense to buy.
Tax implications
There are also bookkeeping and financial aspect of things you should consider. With rentals, the expenses will likely be deducted annually as a business expense, or it can be billed back to your customers. However, purchasing a piece of equipment is a capital expense, and this must be treated as such during the tax period. The purchased machinery's whole expense can’t be deducted the same year it was purchased. The capital costs are then reduced or repaid over the lifecycle of the machinery.
What is Your Budget
For companies without much immediate cash on hand to buy this equipment, renting may be a smart decision. You’ll pay less for the equipment rental while still using the machine as required. Plus, you can skip maintenance costs and insurance premiums when you rent instead of buying. Spending less money upfront allows you to invest in your company’s operations. If you want to rent more equipment or hire more workers, you’ll have the resources to do so since your capital is not tied up in purchased equipment.
Perform A Five-year ROI Analysis
When deciding whether to make large capital expenses such as purchasing equipment, it is recommended to perform a full 5-year ROI analysis of purchasing the equipment. Ensure to consider all associated costs and essential considerations, including but not limited to: operator salaries, cost of fuel, depreciation, utilization rates, resale value, storage costs, and estimated revenues from the projects. In the case, your ROI is higher for purchasing the machinery after 5 years vs. renting, and it fits the mold for all the other purchase indicators, then you can move forward with the purchase.
Whether you are considering Takeuchi rentals or Takeuchi construction equipment for sale, Act Construction Equipment got you covered. We are a proud dealer of Takeuchi US compact construction equipment. Contractors and businesses know we are one of the top Takeuchi equipment dealers they can count on when it comes to everything new and used Takeuchi equipment for sale and rentals. For more information about our line of Takeuchi construction equipment, contact us today.