Working with an up-to-date rental house or welding supply distributor can allow you to gain experience with new equipment before buying it, and it can allow you to make head-to-head comparisons before purchase. In addition, moving up to new technology might enable you to bid a job more competitively (such as offering shorter lead times by switching from Stick to flux cored welding or replacing flame and/or resistance heating with induction technology).
Financial Decision Drivers
When considering financial decision drivers, many contractors overlook total cost of equipment management. For example, say you're based in Chicago and successfully bid on a job in St. Louis. You now have think about the cost of transporting welding equipment 300 miles, and that includes the cost of the truck, the driver, loading and unloading time and diesel fuel. Then, once on the job site, you'll need to hire someone to maintain and fuel the engine drives.
Fig. 2 - Factors Influencing the Rent or Buy Decision
- Utilization Rate
- Capial Expense
- Interest Rate (if financing a purchase or lease)
- Tax Incentives
- Rental Rate
- Maintenance Costs (parts and labor)
- Transportation & Storage Costs
- Technology Advances
- Core Competencies
Also, ask yourself if your core competency includes fleet management. If you excel at transportation, storage, logistics and equipment service and maintenance, purchase your own fleet. Otherwise, consider outsourcing equipment management. Another trend in the construction industry is to create a separate division (or even a separate corporation) for equipment management. By focusing solely on this task, these divisions or entities can excel at controlling costs while meeting the needs of their "internal client" or sister company.
If you decide to rent, the cost of renting is treated as job cost, so you can charge it directly to the project. Further, if the value of the equipment rental compared to the total project is low, then the "lost" profits due to renting are almost immaterial. Conversely, if the equipment costs comprise a large portion of the job's budget, then a contractor owning the equipment operates at a competitive advantage.
Renting equipment also adds a tax incentive, as there are no associated property taxes or licensing fees, and you can write off the rental charge as a business expense. Further, if you own a large fleet of welders, you'll need storage space, which in turn adds all the cost of building ownership. With a rental house, all the equipment is off your hands once you're done with it.
In the construction industry, most companies choose to purchase gas engine drives and rent additional diesel engine drives or multiple arc welders to supplement a smaller, core fleet. The reason is simple: gas engine drives cost just one-third to one-sixth of a diesel engine drive (see Fig. 3). With a strong economy over the last several years, many companies have elected to invest their capital in good welding equipment.
Fig. 3: Equipment Costs
Many companies also choose to buy engine drives because the technology remains relatively stable (with a few notable exceptions, such as Miller's PipePro 304 engine drive, which essentially blends a Kubota diesel with an XMT 304 CC/CV. Most engine-driven technology advances focus on improved quality, reliability and simplicity, as opposed the process advances common most often associated with manufacturing (e.g., pulsed welding). With "ordinary" Stick, flux cored welding, carbon arc gouging and DC TIG as the "core" construction process, a CC/CV engine drive is much less likely to become obsolete, so there is little of a chance of buyer's remorse. Also, an engine drive holds its resale value very well. Unlike a car, for example, you can use an engine drive for 1,000 hours and still get close to what you paid for it if you choose to sell it.
Miller offers the CST 280 Stick/TIG welding power source in four (355 lbs.) or eight (640 lbs.) arc rack configurations. The racks' small footprint takes up minimal jobsite space and enables construction contractors to store a multiple premium arcs in one convenient location.
The one "technology trend" that has evolved rapidly is the use of portable inverter-based welders, plasma cutters and suitcase-style wire feeders on job sites. If you are hesitant to invest in this equipment, try it out on a rental basis before you purchase it.