The Ultimate Guide to Renting vs. Buying Construction Equipment

The success of a construction project depends in part on the availability of necessary equipment. Crews use this equipment to turn blueprints into actual structures. When the right equipment isn’t available, a project may be delayed. Any delays could lead to cost overruns, unhappy customers, and more.

One way to avoid this issue is to purchase equipment. However, doing so requires the company to consider several factors. The owner must know the pros and cons of renting an excavator or any other piece of heavy machinery and the pros and cons of buying this equipment. They can decide which option is best for their situation with that information.

The Benefits of Renting Construction Equipment

Renting equipment is cost-effective in many cases. There is no significant upfront investment, and the company can allocate its resources better. Project budgets have more flexibility, and the overall cost of short-duration projects decreases.

Construction crews can rent the equipment they need for any project rather than using whatever the company owns and making it somehow work. There is no long-term commitment when renting and no capital investment. The company can rent what is needed for a particular project.

Renting the equipment rather than buying it means the company won’t need to worry about maintenance or repairs. These fall on the rental provider, saving the company time and money. The company knows equipment in good working condition will be ready when needed.

The Drawbacks of Renting

However, renting rather than buying construction equipment can lead to higher costs in the long run. It’s best to purchase the equipment if the project will last months or possibly years. Furthermore, rented equipment cannot be customized. If the builder needs a specific configuration, the machine must be purchased.

The construction crew is at the mercy of the rental provider regarding inventory and availability. During peak periods, the crew may find they cannot progress with a project because they lack the necessary tools. This lack of availability disrupts project planning and execution. The project may fall behind, leading to cost overruns and unhappy clients.

The Benefits of Buying Construction Equipment

When a company rents the same equipment multiple times for different projects, it should purchase the machinery. Doing so will save the company money in the long run. While the upfront price will be high, there will be no rental fees and other expenses associated with renting. The company can budget for the cost.

Companies can customize equipment at the time of purchase, something they typically cannot do when renting. When the crew has the right equipment, project efficiency and productivity increase. The company owns this asset and can list it on the balance sheet, and it may be resold when the business wishes to upgrade.

The Drawbacks of Buying Construction Equipment

While purchasing construction equipment outright offers many benefits, companies find the upfront costs high. A business might not be able to afford to buy, even when it chooses to look at used equipment rather than new. A large capital outlay can negatively impact cash flow and limit the company’s ability to make other needed investments.

A company must consider repair and maintenance costs when determining whether it can purchase heavy machinery. One or more individuals must be charged with servicing and repairing the equipment, which means time away from other tasks. This individual may need training to handle the tasks correctly, and the company must pay for all parts and supplies.

The equipment depreciates over time, affecting its asset value and the resale price. Depreciation has tax implications, although tax deductions may offset these implications.

Every company must consider these benefits and drawbacks before determining whether purchasing or renting makes more sense. What works for one company might not be appropriate for another. If help is needed in making this determination, the business owner may wish to speak to their financial advisor, as this is one decision they don’t want to get wrong.