The heavy machine rent or buy conundrum for small and medium construction companies

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Without proper equipment such as skid steers, cranes, tractors or excavators, the construction industry would not be performing as it is now in terms of project durations. What most people do not realise is the fact that what these machines actually offer is time and as most of us already know, time is money and within the scope of construction projects, a lot of money.

This fact however may seem distant from the decision to buy or rent construction equipment, when in actual fact it is totally and entirely relevant. To make the right choice between buying and renting, the most important element is how many hours will the machine be used for all the potential projects that are in hand in terms of days as the construction excavator rental business offers daily, weekly and monthly rates and the daily rates being the most expensive.

It is generally all about financial mathematics involving cost of renting, cost of buying, capital structure, cash flow and therefore if all of the company’s projects require an excavator or skid steer for example for a total of 90 days that would amount to about 15,000 dollars more or less on a weekly rental basis.

However, deciding to buy an excavator based on this factor alone would be folly as will it only be a specific machine of the same capacity that will be required for all 90 days is another question that must be answered before jumping into the purchase, as there are plenty of other cost factors that must be accounted into the math such as the cost of maintenance, storage and moving the machine from one site to another which would require a truck.

Is the company going to buy a truck just for the purpose of transporting the machine? A truck would easily cost another 15,000 dollars and then there is also the cost associated with the truck which is the direct result of owning a machine.

In contrast, renting offers a variety of option meaning the construction team could use a tractor for some jobs, an excavator for others and even a skid steer for jobs that have little space for machines to work with. The management of the company also do not have to bother about maintaining the machine, or storing the machine as the companies that offer construction equipment on hire also provide delivery and pick-up at minimal additional cost.

Apart from that when machines breakdown, they are replaced without additional charges and in contrast, when machines that are owned breakdown, projects are halted until they are fixed or if the project is on a tight schedule (mostly are), the company would incur additional cost by renting despite owning the machine. The entire situation as mentioned above is about project planning, how many projects, what kinds of machines are required and the duration of their use.

Most construction companies, especially medium to large companies, may own a few machines for basic jobs; they nevertheless take specific machines such as skid steers and mini excavators for hire as they see it as a cost savings factor and as a component of their lean construction management concept.

Most of these construction companies that take equipment for hire generally have healthier cash flows and capital structures allowing them to take on more projects compared to companies that choose to buy expensive construction machinery and have their capital tied down to the machine that for the most part is left idling in storage and used sparsely.

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