Monday
Apr282014

Should you buy or rent construction machinery?

Construction equipment manufacturers may have noticed the shifting trends of renting versus buying construction machinery, based on the larger economic environment. As economies recess, businesses have less liquid capital for asset expenditure and are more focused on getting through the short term. As economies improve, businesses have more money to spend on purchasing assets and are more likely to focus on the long-term benefit of ownership. Ultimately, the decision as to whether or not to buy machinery comes down to the price of new equipment: indeed, construction is very more costly than that VW polo for sale in Cape Town that you may be eyeing out…

Here some considerations to think about in terms of renting versus buying construction equipment:

Renting

Construction equipment rental doesn’t require a huge amount of capital outlay and is generally only required for short periods of time. Machinery owners and the renters will agree on the rental period as well as the cost of renting. Some agreements can be for a daily, weekly, or monthly cost. As a rule, however, the shorter the rental term, the more expensive the rental amount will be per day. The many benefits of renting include the fact that no major capital outlay is required, nor is the construction business required to go out on a limb to get the equipment financed. Equipment can be very easily procured in comparison to more permanent machinery.

Fortunately for renters, they can claim back the monthly rental amount as a business expense on their tax deductions. The up-front money they would have paid if they had to buy equipment can be used for other businesses expenses and to increase their cash flow. The machinery owners are responsible for the insurance fees and the maintenance costs required for the upkeep of the machinery. While some of this will be offset by the rental agreement and fees, the renter still benefits from not having all of those expenses on his shoulders.

Buying

While construction equipment is very expensive to procure, it is a once-off expense, which can be considered an investment into the company’s ability to perform its functions. After that expense, the construction business owns the equipment as fixed assets, which only need maintenance and upkeep costs to be paid. In the long run, buying equipment is cheaper than renting, and construction businesses have something to show for their investment.

Buying construction machinery is a lot more profitable for well-established businesses that know they have a future in the industry. If they plan to use the machinery extensively, it’s more economical to buy it than to rent it. Equipment owners can also claim back a certain percentage of the cost of the equipment from revenue services.

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Reader Comments (2)

These construction machines are very expensive and we can get even used ones at a low price. Thanks for sharing this post..It wass really very informative.

May 2, 2014 | Unregistered Commenterused machinery

Buying heavy equipment has to be considered as an investment. Most of the buyers profit from this one-shot investment over years and finally sell it on used equipment websites like http://www.machineryzone.com at very fair prices.... Often abroad where there is demand. Thanks for this very informative article!

May 15, 2014 | Unregistered CommenterJack

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