RENT, LEASE OR BUY — WHAT’S THE BEST OPTION FOR CONSTRUCTION EQUIPMENT? By Agako Nouch, Vice President, Sales, and Ryan Sherwood, Vice President, Retail Development, Volvo CE
conomic conditions and market uncertainties have big impacts on whether construction customers are renting, leasing or buying equipment. Recently, there’s been a healthy level of activity in all three as the demand for construction equipment has grown along with the economy. Contractors have been buying more machines, but they’ve also been using more rentals and leases to supplement their owned fleet. There’s no right or wrong answer — it really depends on your unique situation. To help you understand your options, we’ve laid out some pros and cons of renting, leasing and purchasing your next machine.
RENTING Renting is typically most popular for shorter term needs (months or weeks). Also, smaller companies may not own many pieces of equipment, and therefore may rent more often. If you’re interested in renting, you’ll want to keep machine availability in mind. The more standard a machine is the more likely it will be available for 24
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rent, whereas specialty equipment is typically more difficult to find and rent for short terms. Pros • Most flexible (month-to-month payments) • Lower capital requirements • Not responsible for maintenance • No need to put a rental on the balance sheet • Pay only for use and time you need it • Can opt to try before you buy with a rental purchase option (RPO) Cons • Possible use restrictions • Usually has higher monthly payments than loan financing and leasing (like buying a house, buying a machine has a slightly lower payment than renting, and the buyer is building equity). • Likely to incur charges for damages • Higher long-term use cost • Limited to what’s on the lot • Some specialized equipment may not be available when it’s needed
• In the U.S. right now, all rental payments may be expensed against taxable income, but currently with ownership, the full price of a machine could be depreciated for tax purposes in the first year; however, you should check with your tax advisor for your individual situation. • Rental companies and dealers have the right to swap out a rental machine if it’s sold, which could cause delays and/or operator re-training.
LEASING Leasing adds a blend into the total ownership/use mix of your fleet, which most companies like. Leasing is more flexible than buying, but less flexible than renting — you have to commit to a period (usually 24 to 60 months). Typically, companies that have access to their own source of capital choose to buy rather than lease. Most equipment can be leased, but the more specialized a piece of equipment is, the higher the relative cost of leasing becomes. This is because the party leasing { Continued on page 26 } C A LCO N T R AC TO R .CO M
