Equipment: Rent vs. Buy
Setting the Stage
Deciding whether to purchase or rent a machine for your construction project requires careful analysis. Let's say you're facing a two-year project and need a Telehandler / Reach Forklift. You've settled on the Genie GTH 5519 Telehandler, which has a 5,000 lbs. capacity and a 19 ft reach. The cost to buy this 5k Reach Forklift is $50,000, while renting it would cost $1,998 per month. Now, let's delve into why purchasing the $50,000 machine is the wiser choice for a two-year project.
Digging Deeper
Total Cost of Ownership
By purchasing the machine, you pay $50,000 upfront. Renting the machine for 24 months would amount to $47,952, a slightly lower cost.
Resale Value
Consider the possibility of selling the machine once your project is complete. Depending on its condition and market demand, you may recoup a significant portion of the initial $50,000 investment. This resale value can further reduce the total cost of ownership and make purchasing more financially appealing.
Control and Availability
Owning the machine grants you complete control over its usage and maintenance. You won't face the risk of unavailability due to rental scheduling conflicts or maintenance delays. This control allows for better project planning and reduces downtime-related costs.
Tax Benefits
Equipment purchases often come with tax advantages, such as depreciation deductions and potential tax credits. Consult a tax professional to explore how buying the machine can benefit your business financially. These tax benefits can further decrease the overall cost of ownership.
Long-Term Projects
For a two-year project, the advantages of ownership become more evident. The initial investment begins to pay off, and cost savings increase over time. When comparing costs for extended periods, owning the machine proves more cost-effective than renting.
Equipment Customization
When you own the equipment, you can invest in customizations or attachments to enhance its performance tailored to your project's needs. This customization improves efficiency and saves money in the long run.
Business Growth
Owning the machine expands your business capabilities. By having the equipment readily available for multiple assignments, you can take on more projects and diversify your services. This growth potential leads to increased revenue and profitability.
Potential for Additional Income
If you aren't using the machine full-time, consider renting it out to other contractors during downtime. This generates extra income that offsets the purchase cost. Rental income further enhances the financial benefits of ownership.
Conclusion
To sum up, investing in the machine for your two-year construction project is a smart move with numerous benefits. Not only does it provide cost savings and the potential for resale value, but it also offers tax advantages, control over the equipment, customization options, and improved long-term project efficiency. Furthermore, owning the machine opens up opportunities for business growth and additional income streams. When making your decision, take into account your specific financial situation, project requirements, and long-term business objectives to make a well-informed choice.
Phil Stephens - President of GearHeadz Equipment Sales & Rentals
