When you need heavy equipment or trucks, how do you decide when to buy outright, finance, lease, or rent what you need?
There are pros and cons to renting, buying, leasing and financing. It pays to evaluate your company’s current situation and capabilities (financial and otherwise), as well as your future plans. Carefully consider which method of acquiring equipment will be most advantageous to your business – and which will make your life easier.
Pros and cons at a glance: buying, financing, leasing and renting equipment and trucks:
| Buying | Large initial investment Cheaper over the long term Increase assets without increasing debt Get a return on your investment when you no longer need the equipment More convenient–equipment available whenever you need it Possible tax advantages |
| Financing | Low initial investment (look for $0 down) Leaves cash free for operating expenses Low, predictable monthly payments Get a return on your investment More convenient—equipment available whenever you need it Possible tax benefits |
| Leasing | Leaves cash free for operating expenses Wide choice of lease types and payment options Predictable payments Flexible: option to buy or return at end of term Possible tax benefits More convenient–equipment available whenever you need it |
| Renting | Low investment over the short term Access to a broad range of equipment (subject to availability) Latest equipment usually offered Maintenance, insurance etc. handled by another party |
Five factors to consider before deciding how to get the equipment you need
Here’s a closer look at five things you should bear in mind before deciding on the best way to acquire the equipment and trucks you need.
1. Current financial situation
Do you currently have the capital to pay cash up front, or is leasing or renting a better option for now?
Buying may be a larger one-time outlay, but rental fees can add up quickly, and over time can end up costing more. Plus, when you own, you can see a return on your investment when you sell.
You can reduce the initial financial impact of buying a piece of equipment in many different ways:
- Buy good quality used equipment – purchasing well-maintained used equipment can be cheaper than buying new and may be more cost-effective than long-term renting.
- Finance your equipment purchase – give your company some extra financial breathing room by financing your equipment purchases and keeping your capital to run your business; with the right financing plan, your payments could even be lower than rental payments.
- Lease with the option to buy – some leases allow you to determine your monthly payments, and at the end of the term you can decide whether to buy, renew the lease, or return the equipment. Plus, leasing offers potential tax benefits.*
Equipment financing and leasing available at Ritchie Bros.
2. Cost of equipment ownership vs cost of renting
It’s also important to estimate the cost of equipment ownership versus the cost of renting it. With ownership comes maintenance and operating costs, insurance and other fees such as government licensing.
Renting is generally an inclusive cost, but rental companies have to turn a profit, so consider that your rental fees will include the purchase price and the cost of ownership, both marked up.
Fuel is a cost that is common to both owning and renting and needs to be considered for both. Roughly, one-third of your total expenses will be for the cost of fuel.1
3. Length of project or job frequency
Of all the things to consider, project length or the frequency of jobs on the calendar could be the deciding factor in how you acquire equipment. If it’s a short term job, or you need a specialized piece of equipment for a one-off job, then renting may make more sense.
If you’re working on a long project, or you have several jobs lined up, then buying or leasing probably makes better sense given that rental costs add up quickly the longer a job goes on.
A multi-purpose piece of equipment (loaders, excavators, skid steers, trucks etc.) that can be used for various projects is a great asset on any jobsite.
New and used boom lifts for sale at Ritchie Bros
4. Equipment availability & usage
The big advantage of owing your own equipment is that it’s available to you 24/7 – “if you own it, you control it”, as the saying goes. You can react to unexpected changes in projects or project schedules, take on jobs at a moment’s notice and complete projects with less downtime.
Before you decide whether to rent or buy, you should weigh the potential risk of a rental company not having the machine you need when you need it. Owning can be a plus to your potential clients: they know you’re equipped to take on their job, and are also a stable, trustworthy business. Some companies won’t award contracts unless they know you own the required equipment.
5. Fleet management and inventory control
Managing your equipment is also something to consider. If you have the skills and the time, you can save money over the long haul by buying some or all of your equipment and taking care of insurance, maintenance, etc. yourself; if you don’t, you may want to pay a little extra to rent. Managing your fleet means you’ll know where equipment is, who’s running it, and you can schedule jobs and equipment accordingly.
A huge choice of equipment, and a choice of ways to get it.
Once you’ve decided what equipment and trucks you need, Ritchie Bros. offers a choice of buying options including our unreserved public auctions, weekly online auctions and our 24/7 Buy Now, Make Offer Marketplace-E
Learn more about financing and leasing options from Ritchie Bros. Financial Services, or call them at +1.855.331.5750.
*Tax regulations vary. Consult your tax advisor for more information.
It’s good that you mentioned how ownership of equipment also comes with costs for maintenance, repairs, and insurance. I imagine if you need to do short-term welding work, it’s best to go for equipment rental instead of buying the machines and tools you need. I’ll be sure to keep this in mind if I ever need equipment rental services in the future.
We want to renovate our patio next month, so we think we’ll have a lot of construction debris to deal with. My wife and I believe it’d be wise to rent a dumpster truck to get rid of all the debris, so we’ll look into it this weekend. Thank you for the advice on how renting heavy equipment helps us choose only the machines we’ll need for our project.