Buy or Rent: 5 Questions to Ask Yourself

How to determine which of your construction equipment needs could be filled most cost effectively with rented machines

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Caterpillar Inc.

By Jason Hurdis, Global Market Professional, Construction Materials, Caterpillar Inc.

There was a time when you really had just one option when you needed equipment — you bought it. Sure, you could finance the purchase or choose a lease, but you generally ended up owning the machine. Not any longer.

According to a report from Allied Market Research, global construction rentals reached $91 billion in 2019 with $106 billion expected by 2027. An American Rental Association survey found that 93% of respondents rented equipment in 2019, with more than half planning to rent as much or more in the years ahead.

So which is the better path: buying or renting? Actually, they’re both smart choices, depending on your situation.

To determine what’s best for your business, start with these five basic questions:

  1. What’s your financial situation? Consider buying (or financing a purchase) if you want to build equity and enjoy the tax benefits of depreciation. You’ll also see a return on investment when you sell owned equipment. On the other hand, if you’re not ready to make an upfront financial commitment or want to hand off some of the operational expenses, rental is an option.
  2. How much and for how long will you use the equipment? For machines, tools or attachments you plan to use day in and day out, project after project, purchasing often gives you a good return on investment. But if you only need equipment for a short-term project, or it’s a specialty tool you aren’t likely to use again, renting may make more sense. A good rule of thumb is to rent if your planned usage is below 40% and buy if it’s above 65% — if it’s in the middle, weigh other factors.
  3. Are you already familiar with the equipment? If you’re replacing a machine you love or adding a similar model to your fleet, then you know how to operate it and what benefits it brings to your operation. You can buy with confidence. But if it’s a type of equipment you’ve never used before or features technology that’s new to you, renting gives you the opportunity to “try before you buy.” That way, you don’t risk making a big investment in a product that’s not right for you.
  4. Are you willing to handle maintenance and repairs? When you purchase equipment, the job of maintaining and repairing it falls on you, which means you either need to tackle those tasks yourself, employ someone to take care of the work or pay a third-party to do it. When you rent, your rental provider handles maintenance and repairs. Don’t think of it as “free,” though — these costs are absorbed into your rental payment.
  5. How far — geographically — does your work take you? Do you regularly work out of state or take on long-distance projects? Are you juggling multiple projects in different places at the same time? If your business has a physical presence in or near these locations, then you have a place to store and maintain any equipment you buy when it’s not in use. If not, renting is a way to eliminate the need to pay for storage space as well as the expense of transporting equipment between locations.

There’s no right answer in the “buy or rent” debate. It’s all about your business, your priorities and how you personally like to work. Many contractors have found success employing a combination of the two approaches.

Curious about all the available options for acquiring the equipment you need? Take a look at your choices.