By David Crary
As a green industry business, your equipment is vital to the success of your business. It makes you more productive, which in turn enables you to lower your price, be more competitive and ultimately more profitable. We know; our work order software is really like a piece of equipment for your business. Like your equipment, it can make you more productive and profitable. It makes your entire business run more efficiently.
One of the biggest decisions when acquiring equipment for your business is whether to rent it, lease it, or buy it. Each has its own pros and cons to weigh before making a decision. Here's a brief breakdown of what to think about when evaluating what's best for your business:
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Rent: Renting is essentially a short term agreement between you and the business renting you equipment. Typically, you can rent for days, weeks or months, with the usage cost of the equipment going down as the term of the rental period goes up. When compared to leasing and buying, renting typically will cost more on a per use basis, but requires less up-front cash and little to no maintenance.
Pros: Renting is great if you only plan to use a piece of equipment for a project or two. There's no maintenance cost. Renting is also a great way to try a new piece of equipment before you buy it. For contractors with poor credit or small cash reserves, renting is a good option. Plus, renting allows you to only pay for the time you actually use the equipment.
Cons: Obviously, for longer-term projects or equipment you're going to use every day or every week, renting can become costly. There's also potential to be charged a significant fee if equipment is damaged and in need of repair. -
Lease: Leasing typically involves a longer-term commitment of a year or more to use equipment for a specified rate, which is typically higher than buying outright. Many leases have options to buy. If you lease, you're still typically responsible for things like insurance and maintenance.
Pros: For equipment that you plan to use long-term, leasing can be a better deal than renting. I've known a couple contractors who prefer to lease all of their equipment in three-year terms because it's fairly cost-effective and they're always trading up to new equipment once their lease is over. Plus, they're better able to predict their monthly equipment expenses.
Cons: If you need a piece of equipment on a day-to-day basis, leasing is going to be more expensive than buying the equipment outright. In fact, some studies show that leasing can cost 20 to 30% more than buying over the course of the lease. -
Buy: Unlike renting or leasing, buying enables you to own equipment outright, whether by purchasing with cash or financing.
Pros: As we mentioned, for equipment you're going to use daily, buying is typically the cheapest of the three options. As a result, buying makes your business most profitable.
Cons: Buying requires more cash – typically in the form of a down payment or the purchase price. Buying can be more expensive than renting if you don't plan to use the equipment frequently.
Some additional tips to consider before making the decision to rent, lease or buy:
- Determine the equipment's lifecycle and your needs. Don't lease if the lease period will extend beyond the equipment's lifecycle and or needs.
- Read the fine print on any contract. Avoid contracts that benefit the rentor or lessor in exorbitant ways.
- Talk to an accountant and an attorney to review any agreements and to determine tax liability.
Now that you've decided whether renting, leasing or buying is best, it's time to go get that equipment. Our 2013 Green Industry Equipment Report can help. Based on a survey of more than 200 green industry businesses, the report indicates which brands are preferred by green industry contractors for common equipment classes.