Is It Cheaper to Rent or Buy Equipment?

 

What’s new: Renting equipment can be 2 to 4 times cheaper than financing it. 

What’s the caveat: Financing and purchasing equipment might be the better option for you, depending on what your company does. 

Why it matters: Running a cost-benefit analysis for your company will tell you if renting can save you money in the long run. 

 

Pros & Cons of Renting & Buying

Is it cheaper to rent or buy equipment? Learn the benefits and pitfalls of each: 

Pros of renting:

• • You’re never stuck with outdated equipment or technology. 
    • Great if your business’s efficiency depends on the latest model of equipment 
  • Less expensive up-front. 
    • No need to find capital for a down payment
    • You’ll have predictable payments without interest
    • Easier to budget for over time
  • Increased flexibility. 
    • You can easily change pieces of equipment with a call to your rental team 
  • Tax deductible.
    • Renting is often 100% tax deductible because it’s an operation expense
  • Fewer maintenance costs. 
    • If something breaks or needs maintenance, you’re usually not on the hook for the cost

 Cons of renting: 

• • Over time, your company might lose money. 
    • If you will use a piece of equipment every day for months or even years, your rental bill might be higher than if you purchased 
  • Zero equity. 
    • You’ll have no potential to make money back at the end of your rental term 
  • Rental terms might be longer than you’ll use the machine. 
    • If you don’t need the equipment, it may sit on the jobsite until the end of your rental term, costing you money and taking up space
  • Specific equipment may not be available when you need it. 

Pros of purchasing:

• • You can make any modifications to your own machine. 
    • Because you can request service whenever you want, you may experience less downtime
  • No terms and contracts with a rental company. 
  • You can sell it at the end of its use.
    • Selling lets you recover some of the cost because you’ve built equity in it
  • You can purchase whatever brand you need or want. 
    • You can be specific about brands and types of equipment, and you won’t have to rely on what a rental company has available

Cons of purchasing:

• • You will have terms and contracts with a finance company, and you’ll owe interest. 
    • Unless you had the capital to pay for the machine outright, you’ll experience both
  • Your monthly payments will be higher compared to monthly rental payments.
  • Your equipment will eventually fall behind technologically. 
    • As newer options hit the market, you’ll have to decide whether to repair and upgrade your equipment or sell it to buy something newer
  • You’re on the hook for all maintenance costs. 
    • Keeping up with PM is vital, and when something inevitably breaks, repairs can be expensive

 

To see if renting or buying will be a better investment, focus on 2-3 jobs and the equipment you’d need for each. Pick jobs that you’re more likely to do again, so your estimates will be for the correct equipment. 

Rental

• Estimated rental payments for the machines you’d need 
• Estimated cost for rental company to transport the equipment 

Purchasing

• Approximate cost of a new machine 
• Projected lifespan of a new machine 
• Estimated cost of maintenance and service over the life of the machine 
• Estimated cost of transportation and storage
• Availability of the equipment you want to purchase
• What financing options are available to you
• How much capital you can spend on the machine outright
• Possible other uses for the equipment

Overall

• Time needed
• How often you’ll need it 
• Estimated rental payments for the period of use and machines needed
• Estimated amount of labor saved with either option (ex. for transportation)

Once you’ve got these numbers, you can compare the options to see which will save you the most money.

You might find that certain pieces of equipment will be cheaper to purchase, especially if you will be using the equipment at least 60% of the time. 

Additionally, if you are planning to keep the equipment for several years and won’t have to transport it frequently, you may save money purchasing and maintaining your own equipment. 

 

Taking the time to perform a cost-benefit analysis will tell you what your best option is. 

So should you rent or buy equipment? While renting will definitely save you money in the short term, you might find that purchasing is best if you plan to keep the equipment for a long time. 

No matter what you choose, Hugg & Hall is here to help! We’ll help you figure out what option is best for you. Contact our rental and sales teams today to speak with one of our equipment specialists.