Rent, Lease or Buy: Understanding Your Options When Acquiring New Equipment

When it is the time to add new equipment to the fleet, every contractor or construction company face this one question for sure: Whether to rent, lease or buy the equipment? Well, the answer to this question may be a little difficult as all the three options have their own list of merits and demerits.

Hence, it always makes sense for the contractors or construction companies to pay heed to all the factors and conditions while choosing the right solution. These factors may include cash flow status, expected hours of utilisation, current and projected workload, maintenance costs and host of other aspects that may be specific to the business.

Let us throw light on each of the three options in detail...

Rent the equipment

Not everyone possesses the huge finances to buy the costly Construction Equipment (CE). In such cases, renting CE can make more sense. Renting CE can be a good decision when...

1. You need to give an extra boost to the existing fleet during the busy season: So, if every summer, your work gets doubled but remains stagnant during the other parts of the year, then it makes sense to rent the CE during busy season to supplement the existing fleet. This can help in avoidance of storing and maintaining CE during the slow season.

2. You want to keep your repair and maintenance costs low: When you rent the CE, it is the rental company that handles the maintenance needs of the equipment. This frees up a considerable amount of time, labour and cost required for maintenance.

3. You want specialised equipment for a short-term job: Some one-off jobs may need specialised equipment. Here, renting CE may be a smart option. Further, it is better to rent CE rather than buy a new one, especially for projects with duration of less than three years.

The best part about renting CE is that it is the rental company that will incur the maintenance, depreciation and insurance costs and pay taxes related to the equipment. However, the equipment renter may have to pay for the expenses such as labour and fuel costs associated with the equipment. Another downside of renting the equipment is that the cost to rent is typically higher than a lease payment. Apart from the above mentioned few cons, renting CE can offer a host of advantages.

If you are looking for Renting Construction Equipment and the right partner, then Mahindra Construction Equipment (MCE) should be definitely considered. MCE provides a complete range of equipment solutions to its customers. The unique proposition of MCE includes robust and maintained equipment, trained, competent and experienced manpower resources with the equipment, onsite repairs and maintenance to reduce machine downtime and production loss at customer site, advice on equipment suitability based on applications and training of operator level personnel for various industries. The other benefits of renting Mahindra EarthMaster Backhoe Loader (BHL) model from MCE include less need of capital as rates are affordable, new and updated technology, reduction in down time as 24*7 service support is provided, saving on storage, repair & maintenance, manpower and administrative cost, ease of equipment tracking as the equipment posses highly advanced IT-enabled systems and no issue of equipment obsolescence.

Buy the equipment

Buying is one of the most prominent options for obtaining the equipment if you have a consistent and long-term need for it and have the necessary finances as it can help you save money in the long run. The general benefits of buying technologically-advanced CE include ownership of the equipment, good ROI over long period of time and greater flexibility as equipment is available with you at all times. However, the equipment owners are responsible for all the maintenance, repair, transportation and asset depreciation costs. It is to be noted that many of the costs such as taxes, interest, insurance, repairs and depreciation are tax deductible.

Buying CE can be a good decision when…

1. The equipment would be used regularly: If you have a lot of projects in hand for the coming few months or even years, then it definitely makes sense to invest in the CE which would give you good return of investment in future.

2. You can easily afford to store and maintain the new equipment: If you have the adequate space for storage, then buying CE can make more sense. Also, if you have enough finances to take care of the maintenance costs, then also buying CE can be beneficial.

So, if you are looking to buy multi-purpose and highly versatile CE like BHLs, then MCE’s EarthMaster BHL definitely deserves a special mention. Equipped with superior technologies like REMOTECARE feature and joystick controls, DITEC Engine which can help save over 10 per cent additional diesel every hour, Banana Boom with 7 per cent more reach, superior style and premium looks, Mahindra EarthMaster can offer a host of other benefits to you and undoubtedly drive profitability in your business.

Lease the equipment

Leasing combines some of the benefits of both the options i.e., renting and buying. If you wish to keep the ownership cost of the equipment to a minimum for a specified period of time, then leasing the equipment can be a good option for you. When you take equipment on lease, you are responsible for all the repair, maintenance, insurance and other operating costs associated with the CE for the given period of lease. After the lease period is over, you have to return the equipment back to the company from whom you have leased it. Generally, there is heavy penalty when any of the lease agreement terms are violated or you end the lease before the decided time period or there is any damage to the equipment.

Leases are usually identified as either a capital lease (where you are considered to be the owner of the equipment and held responsible for all the maintenance and depreciation costs) or an operating lease (where the company which leases the equipment is considered to be the owner of the equipment and this type of lease agreement is similar to a rental agreement).

Leasing can be a good decision when...

1. You want the equipment for a short-term: When you know that you need an equipment particularly for two years and after that, you would not need that equipment at all, then it make sense to lease the equipment.

2. You don’t want to put higher finances at stake: Leasing solutions offer a lower monthly payment than rental rates and loan payments. Simply put, when you lease, you incur lower up-front cost since you don’t have to make a down payment as compared to purchasing the CE.

MCE offers following operating lease options to its customers:

1. Dry lease: Here, only the equipment is given on lease and the customer is responsible for all the maintenance, fuel and operator costs.

2. Wet lease: Under this, two types of options are provided by MCE. In the first option, MCE provides equipment as well as operator support and the customer is responsible for maintenance and fuel related expenses. In the second option, MCE provides the equipment with operator and maintenance support and the customer is responsible for fuel support.

Rent, buy or lease: Choose what is best for you!

Looking at the above comparison, it can be said that be it renting, leasing or buying the equipment, each one of the options have their own merits and demerits. Hence, you need to consider all the factors carefully and take the decision wisely. No doubt, MCE can be your one-stop-shop destination for all the requirements!