One of the most discussed subjects is whether to buy or lease construction equipment. There are many considerations to look at, including purchase price, monthly lease costs, equipment usage, or your preferences in general. The topic sparks contrasting opinions, but, in truth, there are immense benefits that come with renting construction equipment. Here are seven benefits of renting construction equipment.
1- Avoid Initial Upfront Investment
Some construction equipment like an excavator is expensive, and thus they take huge sums to buy. When you commit to buy the capital equipment, you will be tying up a lot of money that you could use to do something else. When you need to sell it, the sale price will likely be lower because of the depreciation of the equipment. Renting construction equipment enables you to free up money because you pay for the equipment over a period of time.
2- Low Maintenance Costs
If you own capital equipment, you will have to bear the maintenance cost through its entire life-cycle fully. Although you will still need to maintain your rental equipment, it is not as costly and involving as owning the equipment. This is because you will only service the equipment for the time you have leased it. In some cases, the owner of the equipment services the equipment, thus exonerating you from the duty.
3- Saves You Storage Costs
Harsh weather conditions can make construction equipment wear out faster. Good storage is therefore paramount. If you were to purchase construction equipment, you would have to think about costly storage. Renting construction equipment saves you this burden since the owner takes care of the storage.
4- Saves You Transport Costs
You do not have to worry about the transport as the owner caters to all the logistics of transporting the equipment to your site or taking it back. If you were to purchase, you would bear all the transport costs.
5- Avoid the Cost of Depreciation
When you purchase equipment, you start to incur depreciation costs as your equipment wears out. If you normally prepare books of accounts, you would have to expense depreciation, thus reducing the operating profit. When you need to resell it, it will be hard for you to recoup the initial cost because of the depreciation. You will avoid depreciation costs when you go the leasing way.
6- Tax Benefits
As a business person, you are looking for ways of maximizing your profit and minimizing costs.
In some tax jurisdictions, lease payments are tax-deductible. It means that it will be considered as any other business expense for purposes of computing your business tax return.
7- Easy to Upgrade
It is easy to upgrade your equipment if it becomes obsolete. If you enter into a lease agreement, and then technological developments render your equipment obsolete, you can wait for the lease period to expire and then lease new equipment. This is the beauty of renting as you are not tied to the equipment forever.
If you had purchased new construction equipment and along the way it becomes obsolete, you would have no other recourse other than to dispose of it off and buy a new one. The latter is an expensive undertaking because you would have to look for a buyer, not to mention that you will likely resell it at a lower price than you bought.