Business Issues By Seth Skydel Weighing Your Options
Rent, Buy or Lease?
A Close Look at the Pros and Cons
Should you buy or lease? If you’ ve been in the industry a while, it’ s a question you’ ve probably asked yourself many times. And what you may have also found out is that it’ s a question without a single answer. At any point in time, the buy-lease decision is one that requires considering a host of factors, including the tools and equipment you need based on current and projected jobs, and the relative costs associated with the investment.
“ As a construction business owner, you need to decide whether you’ ll rent, lease or purchase the equipment you need for client projects,” said Kim Mercado from Next Insurance.“ In some situations, the answer will be obvious. In others, less so. To decide which option is right for you, it’ s important to consider multiple factors.”
Should you rent, lease or buy crane equipment? The answer, according to Mercado, requires looking at the pros and cons of each choice:
Renting Pros
• Renting offers the most flexibility, so you only pay for what you need.
• Renting allows you to try out a piece of equipment and decide if it’ s right for your business.
• The rental company is responsible for maintenance and repair costs.
• If a rental breaks down, you’ ll typically receive a replacement within a day.
• Renting can be a good option if you need extra equipment when you’ re swamped.
Renting Cons
• On a cost-per-day basis, renting is typically more expensive.
• It may be tough to find specialty or popular pieces of equipment.
• The rental company may charge a penalty if the equipment is damaged.
Leasing Pros
• You don’ t typically have to make a down payment when you lease equipment, which can help preserve capital.
• You may be able to apply part of your monthly payments to the cost of purchasing the equipment at the end of the lease.
• When leasing, you always have access to the latest products with the newest technology.
Leasing Cons
• A lease is typically a two- to three-year commitment.
• The leasing company may charge a penalty if there’ s excessive wear and tear on the
equipment or if you want to end the lease early.
• You’ re responsible for routine maintenance on leased equipment.
• Leased equipment usually costs more to insure than equipment you own.
But buying equipment is a significant investment, and it isn’ t always the right choice. A rule of thumb from Jason Perez, CEO of YARDZ, the provider of a platform for managing owned and rented assets in the construction industry, was cited by Mercado: If you use a piece of equipment more than 60 % of the time, purchasing it may be more cost-effective than renting or leasing.
“ However, even if your utilization doesn’ t reach that benchmark, it could still make sense to buy if you’ ll use it consistently for three years or more,” Perez said.“ The benefits of buying are lower payments, ready availability and resale value when it needs to be replaced or removed from your fleet. On the downside are the need for a down payment, operating costs, and the need to deal with different types of equipment, manufacturers and parts. It’ s a major undertaking.”
Timing Can Be Everything
Auction companies deal with con-
16 CRANE HOT LINE ® July 2024 • www. cranehotline. com