Are Construction Equipment Rentals Cost-Effective?

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Heavy equipment rentals are increasing across the United States. Rental revenue is growing at over three times that of the general economy. As with all new growth, there are those who question where its coming from and if it makes sense. Could it be the slower economy? Is it really more cost effective for me to use construction rental equipment than just buy it outright? While the former question can be near to impossible to answer, the latter is easily addressed with a few key considerations:

  • What is your current financial situation?

    Before you can even consider buying or renting heavy equipment, you have to assess your current financial situation. When it comes to large construction equipment, buying may not even be in the books at this time. Do you have the necessary capital to buy the necessary equipment outright? Don’t look solely at the immediate term, either, but consider the long-term costs of ownership such as storage and upkeep. Heavy equipment repair costs can be a major drag on a construction project budget.

    There are ways of reducing your initial purchase cost such as opting for used equipment. The risky part of this strategy is not knowing if you’re be getting the best equipment for your money. With equipment rentals, you typically get the newest equipment and latest technology. Over 50% of new construction equipment has migrated to rental lots in the past couple of years.

    • How much will renting and owning cost me?

      While you’re assessing your currently available capital, run the numbers on what it’ll cost to rent versus own. Remember that ownership comes with the added costs of upkeep: from maintenance and repair to insurance, licensing, and storage. With equipment rentals, these costs are usually included in the rental fee you pay. The question is, is the rental fee more or less than the costs you’re likely to incur through ownership over time?

      Another fee to keep in mind is the cost of fuel. While this is a cost you’re likely to incur with both ownership and equipment rentals, fuel costs will likely eat up one-third of your total expenses. It’s important to be aware of such costs before beginning any construction project. Likewise, you may face certain tax implications depending on if you buy or rent.
      • What sort of access will I have to the equipment if I rent?

        Ownership has one clear advantage to rentals and that’s 24/7 access. You’ll be more able to adjust to unexpected changes in the project schedule and can take on new jobs at a moment’s notice. With equipment rentals, you’re at the mercy of the rental company. Check with your local equipment rental companies to determine if they even have the equipment you need and what sort of availability they provide.

        You’ll undoubtedly have greater flexibility through ownership, but if that comes at higher overall costs from maintenance and insurance, etc., it may not be worth it overall.
        • How long will I need the equipment for?

          A big factor in determining the cost effectiveness of equipment rentals over buying is knowing how long you’ll be using the equipment for. If it’s a short project and you don’t anticipate ever needing the equipment again, rentals are likely to be the way to go. If it’s a piece of equipment which you know you’ll need again, ownership can begin to make more sense. Again, it’s all about taking a look at your individual business situation and the needs of your current and future projects.
          • What resale value would the equipment have?

            There is the possibility that buying equipment you’ll never use again can turn into a savvy investment if that equipment has a potential high resale value. You’ll never be able to sell it for what you bought it for, but the difference between your purchase price and resale value could be lower than the cost of the cost of equipment rentals.

          Should you use equipment rentals for your project?

          So do equipment rentals make sense for construction projects? We’ve given you the basic questions to ask, running the number is up to you. As a final bit of advice: a rule of thumb among the construction industry is to rent any equipment you use less than 60% to 70% of the time.

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