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Equipment Rental: Is Borrowing Best? 
Is renting construction equipment the new wave of the future? While pride of ownership counts for a lot, renting can save companies from a financial

Industry experts say that a combination of factors is responsible for this sizable boost, most notably the construction booms of the late 1980s and mid-1990s. According to Fred Snow, president of Brandolini Company in West Chester, PA, the economic boom of the ’90s increased construction projects and, consequently, the demand for equipment. Since equipment is expensive to buy, contractors turn to rentals to meet project needs. “During a boom economy you’ll get a lot of landscapers and other small contractors who decide to get into the development business. That might account for the jump in equipment rentals. Also, bigger companies that own equipment will still rent for other jobs rather than move equipment from site to site.” Snow also points out that there is a lot of equipment from the last boom in the mid- to late ’80s that has aged. “It can be cost-prohibitive to replace this equipment so companies turn to renting as an option.”

According to Mike Whelan, general manager of J.S. Cole Company in Newark, CA, the rule of thumb is that rental costs are 3-4% per month of the total purchase price of the machine. In the San Diego, CA, area, for example, a midsize excavator can be rented at Hawthorne Rent It Service for $475 per day, plus $300 for delivery and pickup (within a 20-mi. radius) and another 10% for insurance (unless the company has a certificate of insurance on file at the rental store). The longer the rental, the cheaper the per-day rate. At this rental store, the weekly rate is four times the daily rate. The monthly rate is three times the weekly rate, and so on. Hawthorne Rent It Service will also arrange for rental equipment to be moved from one job site to another. Depending on distance, this generally costs about $100.

With rental companies providing transport, pickup, and routine maintenance services, rental becomes the most hassle-free, most economical, and even safest option in many situations. Also, more and better equipment is readily available at local outlets in many markets. Same-day rental of heavy, light, and allied equipment and specialized tools is now possible.

J.S. Cole Company has 225 major pieces of Caterpillar equipment: large scrapers, wheel loaders, compactors, and excavators. It serves a niche market of mid- to large-size contractors that have a need for more equipment than they own for a short time-generally one week to six months.

“Our customers come to us because we have low-hour-rate equipment that is highly productive for them. They might own some equipment themselves, but the next job could break the camel’s back. Rather than risk it, they’d prefer to have high availability,” explains Whelan. He adds that his company will send a quality-control specialist for minor repair work. Customers are typically responsible for routine maintenance, such as greasing and oil changes; in some cases the dealer may provide this service. The dealer will respond to major repair jobs. Customers, however, are required to obtain insurance to cover the costs of damage from equipment abuse.

Whelan also notes that J.S. Cole’s rental equipment puts on about 1,000 hours per year. “Although the useful life of most equipment is 10,000 hours or 10 years, we delete equipment from our fleet after 6,000 to 7,000 hours.” This equipment, he says, is traded in to the dealer. When equipment is nearing the end of its useful life, the rental company may offer to convert it to a rent-to-own. In this case, when the subsequent rental payments equal the sales price, the customer takes ownership.

Было бы замечательно, если можно было бы вырабатывать энергию даже тогда, когда вокруг полный штиль, не правда ли? Именно это и предлагает компания Hybrid Turbines Inc., базирующаяся в Колорадо. Ее последний продукт под названием SmartGen гибридная газово-ветровая турбина использует биогаз и природный газ, который вращает ветровую турбину, когда ветер не дует.

Система SmartGen использует для вращения ветровой турбины сжатый воздух, вырабатываемый турбо-компрессором, который работает на природном газе или биогазе. Еще более важен тот факт, что система SmartGen может быть интегрирована в уже установленные ветровые турбины, что позволяет существенно расширить их потенциальные возможности. Кроме того, система продлевает срок эксплуатации турбин, что влечет за собой дальнейший отказ от ископаемых видов топлива. А если установить ветровую турбину с системой SmartGen в районах, где ведется выработка биогаза, то такая турбина станет полностью работать на возобновляемых источниках энергии.

Как работает ветровая турбина? Сцепление, оснащенное интеллектуальным блоком управления, отключает лопасти турбины во время работы турбо-компрессора. Использованный воздух из двигателя резко охлаждается и обеспечивает охлаждение генератора, а также помогает предотвратить пожар на установке.

В настоящее время только 30 процентов от всего времени ветровые турбины производят энергию, поскольку скорость ветра может быть очень маленькой, либо ветра не может быть совсем. По утверждению компании, для того, чтобы турбина не простаивала и вложенные в нее инвестиции оправдались до конца срока эксплуатации, использование других видов топлива станет наиболее рациональным решением. Что и собирается продемонстрировать, разработав и выпустив систему SmartGen, которая может быть использована для оффшорных или береговых ветровых электростанций, имеющих мощность до 4 МВт.

You’ve decided it’s time you need some heavy equipment or trucks. Maybe you’ve got some big contracts coming down the pipe, you’re growing or expanding your company’s capabilities, or you just need to replace your current heavy equipment. So how do you decide when to buy equipment and trucks and when to rent what you need?

With pros and cons to both renting and buying, it pays to evaluate your company’s current situation and capabilities (financial and otherwise), your future plans, and carefully consider which method of acquiring equipment will be most advantageous to your business – and which is also simply going to make your life easier. Certainly, initial cost is a major factor in the decision process, but it’s not the only one – there are several things to consider when it’s time to gear up – usage, availability and more.

Here’s an overview of some of the things you should bear in mind before deciding when to buy and when to rent equipment.

1. Current financial situation

This seems like the most obvious factor to consider – do you currently have the capital to buy or is renting a better option for now? But you should look beyond your current situation and project your costs over several months or years. Although buying may be a larger one-time financial outlay, the cost of renting can add up quickly, and over a long period of time can end up costing you more – especially if the equipment isn’t being used for the entire rental period. And don’t forget: when you own, you can see a return on your investment when you sell. (Use the handy cost calculator below to find out which option is best for your current situation.)

You can reduce the initial financial impact of buying a piece of equipment in many different ways:
Buy good quality used equipment – when you rent, you are often paying for the newest equipment with the latest technology; purchasing well-maintained used equipment can be cheaper than buying new equipment and may be more cost-effective than renting over the long term
Finance your equipment purchase – give your company some extra financial breathing room by financing your equipment purchases and keeping your capital to run your business; with financing rates as low as 5.99%, your payments could even be lower than rental payments

2. Cost of ownership vs cost of renting

It’s also important to estimate the cost of equipment ownership versus the cost of renting equipment. With ownership comes maintenance and operating costs, insurance and other fees such as government licensing, and those costs obviously vary from machine to machine. Renting is generally an inclusive cost, but given that a rental company has to turn a profit, you should consider that your rental fees will include the purchase price and the cost of ownership, both marked up. You will probably have to pay to transport the equipment to and from the rental store as well, over and over.

Fuel is a cost that is common to both owning and renting and needs to be considered for both. Roughly, one-third of your total expenses will be for the cost of fuel.1

Talk to your financial advisor about the possible tax implications (or advantages) of buying or renting equipment for your business. Tip for U.S. equipment owners: you may be able to avoid paying capital gains tax when you sell and buy equipment for your business.

3. Length of project or job frequency

Of all the things to consider, project length or the frequency of jobs on the calendar could be the deciding factor in whether you rent or buy equipment. If it’s a short term job, or you need a specialized piece of equipment for a one-off job, then renting may make more sense. The risk, of course, is that if the machine isn’t being used for the entire time it’s rented due to changes in the project schedule or unforeseen hold ups, then you’re spending money on a machine that’s sitting and waiting, not making you money.

If you’re working on a long project, or if you’ve got several jobs on the horizon, then buying probably makes better sense given that rental costs add up quickly the longer a job goes on. And a multi-purpose piece of equipment (loaders, excavators, skid steers, forklifts, trucks etc.) that can be used for various projects is a great asset on any jobsite.

4. Equipment availability & usage

The big advantage of owing your own equipment is that it’s available to you 24/7 – “if you own it, you control it”, as the saying goes. You can react to unexpected changes in projects or project schedules, take on jobs at a moment’s notice and complete projects with less downtime.

Before you decide whether to rent or buy, you should weigh the potential risk of a rental company not having the machine you need when you need it. Owning can be a plus to potential clients too, who see it and know you’re not only equipped to take on their job, but are a going concern and a stable, trustworthy business.

5. Fleet management and inventory control

Managing your equipment is also something to consider. If you have the skills and the time, you can save money over the long haul by buying some or all of your equipment and taking care of insurance, maintenance, etc yourself; if you don’t, you may want to pay a little extra to rent. You’ll know where it is, who’s running it, and you can schedule jobs and equipment accordingly.

For shorter term jobs, you may want to consider renting, but buying gives you added flexibility. Let’s say you project that you’ll need a piece of equipment for three months. If the job extends for another two months, you have the machine at your disposal. If the job ends and you decide you don’t need it, we can help, you sell it again at another upcoming auction and recoup some of your investment. The frequency of our unreserved auctions in different locations gives you a great ability to control your inventory, and even profit from equipment you don’t need anymore.
Pros and cons: buying versus renting equipment and trucksRenting Buying
 Renting Buying
✔ Lower initial investment
✔ Access to a broader range of equipment at all times
✔ Latest equipment usually offered
✔ Maintenance, insurance etc. handled by another party ✔ Cheaper over the long term
✔ Get a return on your investment when you no longer need the equipment
✔ More flexible—equipment available whenever you need it
✔ Less downtime
✔ Possible tax advantages

Cost calculator: buying versus renting equipment or trucks

First, determine what you need to buy or rent, then create your free account and check auction results to get a sense of the price of used equipment. Check with your local rental store to determine rental and delivery costs.

 

Construction equipment: Often, when faced with needing construction equipment, many companies focus on analyzing the pros and cons of renting vs. buying. Though a vital step in the process of determining what equipment will best suit their specific needs and budget, there’s much more to be examined in order to get the most out of your equipment.

McClung-Logan Equipment Company’s latest infographic, “Navigating the Heavy Equipment Rental Process,” helps walk you through the initial assessment of whether renting or buying heavy equipment is the best option, then provides additional tips about the next steps to take when renting equipment.

There is no universal “right decision” when it comes to the question of renting or buying equipment. Figuring out the best option for you means evaluating your current financial situation, considering the length and frequency of the project, and calculating the cost of a rental compared to the total cost of ownership. Ownership costs not only include the upfront price of the equipment, but costs associated with financing, maintenance and repairs, insurance, transportation, storage, and energy.

It’s important to take the time to estimate the costs associated with each option, as many people are often surprised to learn that the cost of owning a piece of construction equipment can be upwards of $30 an hour. To help you find the average cost of ownership, you can use pre-existing online calculation tools from various manufacturers, like Volvo’s calculator.

The benefits of buying include:
• Cheaper over the long term
• Getting a return on your investment
• Available equipment whenever you need it
• Possible tax advantages

The benefits of renting include:
• Manage your risk and conserve capital
• Access to a broad range of equipment
• Save on storage expenses
• Maintenance handled by another party

The construction industry is project-driven, meaning that oftentimes equipment is left unused for substantial periods of time until it’s needed for a new project. Unfortunately, this leads to equipment depreciation. Renting provides an alternative solution in which rental fees are immediately deductible as opposed to depreciated over a long period of time. Therefore, at least for the short term, construction businesses immediately benefit.

Rental equipment can also deliver some long term benefits, such as allowing you to investigate new business opportunities at a lower risk rate. Renting provides the flexibility to diversify into new markets without any heavy capital investment or extended commitments. One of the other perks of renting is that you’re not responsible for keeping the equipment in line with government regulations.

In recent years, Environment Canada aligned Canadian emission standards with the US EPA for non-road engines, including emission limits, testing methods, and effective dates. Based on their year of manufacture, certain heavy machines may be subject to stricter regulations. When determining whether to rent or buy, the best choice is the one that will increase your overall revenue stream.

If a company makes the decision to rent, their next decision needs to be what equipment company they want to do business with. It’s important to compare the rates of heavy equipment rentals between companies, but there are several other questions to address as well that may not immediately come to mind.

For example, make sure to ask about their billing policies and if there will be any additional fees throughout the process. Many equipment rental companies will charge you extra if the equipment is not fully refueled and cleaned before it is returned. Avoid any unexpected charge by simply asking first.

Also, ask detailed questions to understand the logistics of the rental operation: what is your maintenance schedule for equipment? What are your pickup and delivery times? What is your response time if the equipment isn’t working?

In addition to finding the right company, you also need to find the right piece of equipment to suit your needs. Determine exactly what you’re looking for—if you find that you can complete two tasks with the same machine this will save you both time and money than if you rented two pieces of equipment for separate tasks. Though it may sound like common sense, doing research on the functionality of a machine can be a financially beneficial step in the process of renting equipment.