Purchasing compact equipment didn’t make financial sense for many contractors during the recession – commercial and residential projects dried up, cash reserves were low and equipment loans were difficult to secure. But as the market improves, you may be ready to buy a compact machine. Before making the decision, weigh your options of renting versus buying by considering your jobsite needs, attachment versatility and capital resources.
In part one, you learned what questions to ask about your jobsite needs and attachment versatility. In this second part, you’ll learn how evaluating your capital resources can help you decide whether to buy or rent.
Determining the right time to rent or to buy is a business decision — one that is based on overall equipment needs, cash flow, cash reserves and the availability of financing from manufacturers or conventional lending institutions.
Capital is not as easy to secure as it was before the recession – projects are smaller and still not as plentiful as before when contractors were more risk-tolerant. These conditions allow you to test the purchasing waters with new financing options. There’s growing interest in rent-to-purchase option (RPO) agreements that allow you to put some of your rental fee toward purchasing a machine or attachment, or return it at the end of the rental period.
Rental Rate vs. Purchase Cost
Without question, purchasing a machine carries a greater commitment that typically includes insurance, taxes, licenses, registration, maintenance, operating expenses and transportation fees. Depending on your finances, it may be difficult to justify this total cost of ownership compared to a flat monthly rental rate for a machine that is delivered to a jobsite.
Tax implications must also be considered. Always consult your financial advisor or tax professional to determine if a purchase is a smart decision. While you can deduct rental payments as a business expense on tax returns, there could be tax incentives for purchases, such as advanced depreciation.
The decision to buy or rent is entirely dependent upon your company’s situation. Take the time necessary to fully evaluate all of the factors. There are times when ownership is the best solution for your company, and other times when it clearly makes more sense to rent. The final decision boils down to being able to complete the work you’re performing in the most efficient and affordable manner possible. For more financing offers and rental options, contact your local Bobcat dealer.