Today's construction and agricultural industries are so competitive and rapidly advancing that the need to have the right equipment and enough of it is more important than ever. The current climate has left many companies faced with the decision of whether to rent or buy heavy equipment. Ultimately, there is no right or wrong choice so, we have put together 4- tips to help guide you through your decision process.
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1. Consider what equipment you will need in the next year.
First, you should take inventory of your current equipment and of the machines that you will need to upgrade in the next year. Once you know what heavy equipment you need, you can then determine if it will be used once or twice or if it will be used often over the next few years. Renting equipment is a good option if you have a special job or wanting to try a different machine. A great way to manage your funds and invest in the core of your business operations is to determine if you can consolidate equipment by finding a machine that will help you complete two tasks.
2. Consider Your Current And Future Financial Situation
When looking at your finances, don't just think short term look beyond your current situation and project your costs over several months or years for both purchasing and renting. Buying may be a larger one-time burden, but the cost of renting can add up quickly, and if your job is extended or delayed, renting could end up costing you more. When renting, you also need to consider the transportation factor, which could leave you wasting money and time. An added benefit of purchasing equipment is the potential return on your investment you go to sell.
3. Consider Limited Equipment Availability and Flexibility
Renting equipment always leaves you at risk if a rental company not having the machine when you need it. The last thing you want is a lack of equipment holding your business back. Additionally, ask yourself if there is a possibility that you will need the rental longer than anticipated. Let's face it, it's not uncommon to experience delays in projects. The main advantage of owning your equipment is that it’s yours- available when you need it. You can take on last-minute jobs or handle unexpected changes to project schedules, all with less downtime and rental fees.
4. Consider Tax Time
Talk to your accountant or someone with experience to figure out where you will stand at tax time if you purchase or rent equipment. Rental expenses can sometimes be deducted as a business expense, making it a cheaper option upfront. Buying a piece of construction equipment, however, is a capital expense that must be accounted for at tax time. Although you can't deduct the entire expense during the year in which it was purchased, the capital costs will depreciate over the useful life of the machine. You may be able to leverage a depreciation deduction for the equipment you have purchased for your business.