As a business leader in the competitive construction industry, you have to set short-, mid- and long-term goals regularly — all of which require careful financial planning. From the projects you take on to the timelines you set, and all the way to the human and equipment resources you need, these considerations can make or break your financial stability.
This is when it becomes imperative to consider whether you should rent heavy machinery for your construction projects. Is renting or buying a better option for you? Should you take a leap and buy the machinery, or should you enjoy added flexibility and rent instead?
Let’s break down all the pieces of the puzzle and look at heavy machinery leasing — the pros, the potential cons, and how it compares to buying the equipment you need.
Here’s what you need to know.
Important Considerations for Leasing Heavy Machinery
Before we talk about the pros and cons, we need to talk about some important considerations for both renting and buying equipment.
Financial Projections
First, your financial projections (or capabilities and requirements) for the project year will determine whether renting is a better option than buying. Your first order of business is to compare your potential renting costs to the cost of purchasing and maintaining equipment.
It’s also important to consider the depreciating value of used heavy machinery over the long term. Will you be able to sell the equipment when you’re ready to purchase new heavy machinery?
Consider the fact that you can rent heavy machinery as you need it and on a per-project-basis, meaning that you don’t need to hold on to assets throughout the year if you don’t need them.
Equipment Availability
Will the equipment you need for specific projects be available and delivered to you on time? This is an important consideration in asset planning and timeline projections, which will directly affect delays and the budget of the project.
You can avoid delays when renting by being proactive with your suppliers and mapping out your project year ahead of time. Check for equipment availability well in advance to ensure you get your equipment delivered on time.
Buying the equipment outright allows you to avoid this potential setback.
Storage & Maintenance
Do you have the facilities to store your heavy machinery as well as the manpower and resources required to maintain your equipment throughout the year? If the answer is a solid no, then it might be better to rent the equipment instead.
Renting means that the supplier is storing and maintaining the equipment, keeping it in top shape and taking on the costs that come with year-round maintenance. That said, keep in mind that you can rent the facilities as well as the manpower for equipment maintenance, should you choose to buy.
Equipment Replacement
The last consideration to note is the problem of equipment replacement — or how easy or hard it is to get replacement machinery quickly to avoid delays and budget problems.
When you’re the owner of the equipment, you’re responsible for getting replacement machinery on-site as quickly as possible, and you need to deal with the warranty documentation. On the other hand, when you’re renting, the supplier will provide a replacement.
Now that we have covered some essential considerations, let’s move into the concrete pros and cons of renting construction equipment for your projects.
The Pros of Leasing Heavy Machinery
The first benefit of renting heavy machinery for your business is the operational flexibility.
What does this mean, exactly?
It means that by renting, you have the ability to choose the specific pieces of machinery you need to make every construction project as efficient as possible, and it means that you don’t need to share machinery between sites.
Having the ability to rent machinery for each job avoids creating delays and backlogs, because you have the right equipment available for the right job.
One of the biggest benefits of leasing, however, is the fair market value lease. When it comes to heavy equipment leasing, make sure you have a fair market value lease agreement that allows you to purchase the equipment at the end of your lease. And you’ll purchase it at a fair market value, which is great for buying machinery in a budget-friendly way.
Another benefit is that leasing heavy machinery means you have access to different tiers of equipment to suit your needs and budget. You can rent top-of-the-line equipment if you want to, but you can also rent a previous generation of machinery to better fit your budget scope. When you own machinery, however, you are tied to the equipment you have.
Last, and probably most importantly, renting allows you to test the machinery on-site before committing to buy. This is the best way for a midsized contractor to test and troubleshoot assets in a construction setting, to see whether making a purchase investment would be a good long-term decision.
The Potential Cons of Leasing Heavy Machinery
When it comes to the cons of renting, there are some key considerations to keep in mind before you talk to your potential equipment suppliers.
The first and most obvious drawback would be the long-term cost accrual. Because you are paying month-to-month, you will be spending more money than you would by simply owning the machinery. This is because maintenance and storage are included in the rental price, along with other costs.
This cost can accrue even more if you’re not using the machinery on every project throughout the year.
Another potential problem comes down to the aforementioned availability. If you require a very specific piece of equipment that’s already in high demand across the industry, your supplier might have a hard time delivering it to your site(s) exactly when you need it. Make sure to coordinate with them to ensure availability.
And last, another potential drawback is that you can’t modify, customize or alter in any way the equipment you’re renting. You have to use it as intended and ensure that you return the equipment in the state it was initially rented to you.
Consider a Combination of Buying & Renting
In the end, whether you’ll rent the equipment or buy it will come down to your unique needs, goals and the types of construction projects you have set up for the year. Renting is a great option for mitigating the costs of equipment storage, maintenance and upkeep, and it comes with other benefits such as higher operational flexibility.
On the other hand, buying those key pieces of equipment that you use on every single project is a good way to make worthwhile, long-term investment for your business. Consider a healthy mix between renting and buying to retain flexibility, especially as you move into more complex projects down the line.
