In the process of growth, a business may require heavy equipment to facilitate expansion. Most heavy equipment can be expensive hence requiring a lot of consideration and comparison of available options. Most companies at this time face the dilemma of whether to buy or hire equipment. The problem is that hiring may be expensive in the long run but buying, on the other hand, can lead to future cash flow problems. Every option has its advantages and disadvantages, and businesses are left to weigh the best option for them. Below are some of the factors that companies can consider before deciding on the best option.
How is your Current Financial Situation?
Equipment purchase is a major investment that requires money. A company that has the required capital can purchase, but others can only afford to rent. Companies try to avoid massive spending to prevent cash flow challenges, but the cost of renting can also accumulate o huge figure over a long period. Renting equipment for a long time can end up costing more than buying, especially if it is idle for most of the time. There are also cheaper options such as buying quality used equipment which may be less expensive than both renting for a long time and buying new.
What is the length of the Project?
The length of the project driving you to buy the equipment is another factor to consider. If it is a short-term job or the equipment is needed for a one-off job, renting is the best option. Buying a machine for short period project or for a specialized one-time job means that the machine will lie idle after the project and your money will be lost.
If the job will take considerable time or you frequently get similar jobs requiring that machine, then buying can be a good option. One way of ensuring that you get value for money is by purchasing multi-purpose machines that can work efficiently in different projects. Renting a machine for a long time ends up to be expensive than buying, plus you end up without an asset.
Can you Maintain the Equipment?
Most heavy-duty machinery comes with an additional maintenance cost, which may be the role of the owner in some renting agreement. Some of the complex machinery requires trained experts to operate them, and you may not have such people in your company. The best choice if the cost of maintenance is very high is to rent and avoid such costs. Hiring the machinery from trusted companies such as Miles Hire, means the machinery is already professionally maintained to a high standard.
Is financing option Available?
Owning equipment without paying the huge amounts upfront is an advantage to companies. Financing can help you buy equipment and spread the cost over some time. The advantage is that you pay in low amounts similar to renting and end up with owning the machine at the end. You may pay more than a one-off purchase, but you will save your company from the risk of cashflow problems. Note that financing requires a good credit score and financial capability to repay the debt.
Comparison between the cost of buying and the cost of renting
It is essential to calculate the total cost of renting and compare it to the cost of buying. You also have to add up extra cost such as insurance, licencing fees to the buying cost. An equal, slightly higher and lower price of buying means that buying will be better than renting. Renting is the best option if the cost of renting for the given period is more economical than purchasing.
How are your fleet management and inventory control capability?
Some companies may have the financial capability to purchase machinery but lack the systems and skills to manage them. The choice of buying such equipment is tricky for these companies because it must be accompanied by putting management systems in place and hiring the required personnel. Such companies can choose to rent and avoid the stress of accomplishing everything that accompanies the equipment.
What is your Budget?
A company’s budget is also crucial when deciding whether to rent or hire equipment. Equipment purchase needs huge sums of money which only large companies can afford. Small businesses, on the other hand, may not have enough money to buy upfront and therefore end up renting.
What are the pros and cons of either option?
Both options have their advantages and disadvantages, meaning companies should choose the option that favours them the most. Buying has the benefits of ownership and saving in the long run, but it comes with the disadvantage of additional costs of maintenance and employing operators. Renting can be expensive over a long time, and you end up without owning a product, but it has the advantage of affordability, avoiding service and maintenance cost and getting support and advice from the owner.