To Buy or Rent? The Benefits of Hiring Construction Equipment

In any construction site today, managers can be seen trying to figure out the best ways to optimize their spending without compromising on the quality of their work. It is the site manager or project manager who decides whether to get the construction equipment on rent or purchase it outright. Certain construction businesses operate with large in-house inventory of heavy duty equipment while some others operate with very little or no in-house inventory at all. This second group of businesses is the one that leverages the option of renting construction equipment. 

If a project is short on working capital to meet the cost of badly-needed equipment hiring is a great option to work around. It can help a manager equip his organization with inventory that he never intends to include in his long-term business strategy. He goes for hiring equipment only when there is a need to upgrade specific pieces of equipment in the inventory or when there is a project coming up shortly. Therefore it is mostly for short term use that hiring proves to be the ideal way to get the necessary equipment, without having to stretch the company’s finances.

Across different stages of a project, a manager needs to review the different types of construction machinery that he would be using. Equipment such as, bulldozers, backhoe loaders, skid-steers, tractors, trenchers, compressors, booms and welders among others are used at construction sites. To meet the other requirements at the constructing site at different stages, there are also other equipment that are used in addition to these machines. The use of equipment can vary from one project to another and therefore it is vital that managers have some flexibility in the type of machinery in their inventory.

Managements in the construction industry generally understand that unless they plan to use equipment they purchase, at least 60 percent of the time, there won’t be any worthwhile ROI (Return on Investment). Compared to that, hiring turns out to be much cheaper as this could be useful in balancing equipment cost estimates in relation to overall cost of the project and whether it is worthwhile to purchase construction equipment. The decision will also depend on the financing options available and the cost at which the credit can be accessed.

Heavy duty equipment like those used in the construction industry are capital intensive and carry a substantial tax liability. Besides, the monetary value of the equipment depreciates along with their functionality experiences as more upgraded variants enter the market. This makes it near impossible for the cost to square off within a year of purchase and managers could end up with such expensive pieces of equipment that they get to use only partially even as the resale value erodes quite fast. Another issue with purchasing such equipment is that, the resale value will reduce even more sharply if safety and quality control guidelines are amended during the life of the equipment.

The other challenge that construction project managers will face with purchased equipment is fleet management. Such heavy duty equipment are not compact and have varying dimensions that are quite uneven. Therefore, multiple pieces of such equipment will require enormous storage space which is another huge expense in the long run. When the equipment is hired, it is the rental company that is responsible for storage and upkeep of the equipment which they already have anyway. Hence construction project managers can avoid the storage and other related hassles by choosing to hire heavy equipment on rent.

Construction equipment is capital intensive and can drain out all the cash resources of a project if not handled optimally. Although an integral part of the construction industry, management of such equipment is a specialized activity that is best left to professionals of the niche whose main job is to manage such equipment. For construction project managers to use up large amounts of their business cash and credit lines in acquiring such equipment is not a smart idea. One effective way to preserve and build on a project’s capital balance is to hire equipment instead of purchasing them. An equipment leasing program with an affordable equated monthly installment plan will ensure easier cash flow and zero handling worries.