(Editor’s Note: In today’s Thursday Feature, we look at the age old question that comes with the use of heavy equipment: Should you rent or buy?)
When it comes to improving the efficiency and cost-effectiveness of big jobs in warehousing and manufacturing, there’s no substitute for heavy equipment such as forklifts, front end loaders, power jacks, and even Automated Guided Vehicles.
But purchasing these types of machines can require a substantial capital outlay. So it’s imperative that business owners know they are going to be able to recoup their investment prior to putting up that kind of money.
Often, a better option is to rent, rather than buy, heavy equipment and use it only as long as you need it. The benefit is that you don’t have to invest huge amounts of money to enjoy the use of the equipment you need. Of course, you don’t get to keep the equipment, either.
Here are five questions you should ask before making a “rent or buy” decision:
1. What Can You Afford?
A forklift, power jack or another type of “big ticket” warehouse equipment probably will cost you five figures, minimum. If you are purchasing a large fleet of vehicles, that figure could approach $1 million or more.
Unless you will be using these vehicles on a daily basis — and around the clock — it may make more sense to lease rather than purchase them. When you buy a forklift or other type of heavy equipment, some of your company’s assets are going to be tied up in that single investment.
By renting, you can spend only what you need to get the job done and have the fluidity to use the remaining capital however you wish.
2 When Will You Use It?
A 24-hour distribution center probably has a need for forklifts around the clock. But a construction firm or other company whose business isn’t on as predictable a schedule may only need heavy machinery once in a while.
In the first instance, where the vehicle will be used all the time by multiple operators in any given day, purchasing may make more sense than renting. But in the second — where there’s a chance the vehicle is going to sit idle for vast stretches of time — the company might optimize its investment by only renting it when it’s needed.
3. What are the Hidden Costs?
Forklifts, back hoes and other heavy equipment are mechanical devices. That means even if they are properly maintained sooner or later they are going to break down, requiring costly repairs, downtime, and lost efficiency.
When you own the piece of equipment, all of those expenses are your responsibility. But when you rent by the job, depending on the terms of your rental agreement, you may be able to pick up the phone and have a new, operable replacement at your facility within a few hours and never have to worry about the broken down one again.
Leased equipment usually works a little bit differently. Generally, the company leasing the equipment is responsible for repairs and maintenance costs during the lift of the lease. But some agreements will include these expenses in the cost of the lease — for an additional charge, of course.
4. Can You Service It Yourself?
Every type of equipment needs some sort of regular maintenance in order to perform optimally. If you have someone on your staff who is qualified to work on these machines, you are ahead of the game.
But if you don’t, you will either need to train somebody so that they are up to speed or bring in an outside party to perform the necessary maintenance, at a cost above and beyond the cost of the vehicle.
With a rental, however, maintenance typically will be done by the company that actually owns the vehicle.
5. What Are Your Legal Obligations?
There are federal, state, county and local laws and ordinances that regulate the operation of heavy equipment in the area where you are located. If you own the vehicle, you will need to know and comply with all of them. Violate any single law and you could be liable for fines and penalties, not to mention damage to your business’s reputation.
When you rent, the contract between you and the company you rent the equipment from help protect you from some of that liability. The actual owner of the equipment has much more responsibility than the renter.
While there are benefits to both renting and owning heavy equipment, it’s helpful to use these five questions to look at every side of the issue prior to making a final decision.