Rent vs. Buy: Attachment Edition
There is no right answer that will work for every business owner. Each individual should look at factors such as cash flow, taxes, estimated utilization rates, as well as associated costs like maintenance, depreciation and resale values. Additional factors include the size of the operation and the types of jobs and applications in which the attachment will be used.
If an attachment is only used for a specific task for a one-time-only job, it makes more sense to rent. But if an attachment can be utilized on multiple jobsites, expand the services a company is able to offer and be profitable throughout the growth of the business — or even replace an entire other machine — then purchasing/financing the attachment makes sense. It ultimately depends on a contractor’s cash flow, the size of the business and long-term strategic growth plans.
The Benefits of Rental
There are a variety of benefits to renting attachments. Renting allows business owners to pass the rental costs on to the job and places owning and operating costs in the hands of the dealer or rental house. Renting also limits long-term storage and transportation costs.
Another advantage is that rental houses often have the latest attachments available to rent, so it can be a good way for contractors to try out the latest attachments before making a purchase decision.
While rental has some real benefits depending on the situation, it is important to understand that rental agreements can also come with limitations. Rental agreements often have hour caps, and the payments are considerably higher than a finance payment. Business owners should also be aware of competitive rental rates within their region of operation to ensure they’re getting the best deal.
The Benefits of Ownership/Financing
Purchasing an attachment can offer a variety of advantages. Ownership typically offers the highest degree of flexibility—the owner is ultimately in control of all aspects of total cost of ownership (TCO). The owner/fleet manager will be in charge of maintaining the attachment to ensure maximum uptime and resale value. Another benefit of purchasing attachments is that operators become more familiar with them over time, which can improve productivity.
Another consideration is that while down payments can tie up capital or lines of credit, the monthly payments will be lower than rental payments. Business owners can also talk with their dealers about deferred payments, skip payments, package deals or rent-to-own plans that best optimize new purchases with peak cash flow and seasonal work.
When does it make Sense to Rent?
Put simply, rental is a great option for short-term projects. In a situation where a contractor sees a long-term benefit to a piece of rental equipment, they can discuss rent-to-own options with their dealer.
Business owners should apply the 80/20 rule: If an attachment will be used 80 percent of the time in their core business, it should be purchased. If not, it should be rented. It comes down to utilization. If just 20 percent of what a business does is related to a certain type of job or task, then they should avoid buying those attachments and rent them instead. Business owners need to look at the versatility of the attachment and what they plan to use it for.
Rental is a great option for businesses looking to fill short-term equipment needs without the added worry of ownership costs—maintenance, storage, etc.—which are all carried by the dealer/rental house in a rental situation.
When does it make Sense to Buy?
Applying that 80/20 rule: If an attachment will be used 80 percent of the time in a contractor’s core business, it should be purchased. As an example, job-after-job cleanup around construction sites may warrant the purchasing of a bucket or grapple. Or if a business owner finds themselves renting an auger every week or two, that could warrant the purchase of an auger. It all depends on the needs of the business.
It is important to understand attachment utilization and long-term business plans when making the decision to buy or rent a specific ancillary component. If a project is outside of an equipment owner’s usual scope and is considered a one-time job, then renting an attachment for that specific job saves time and money. However, if an attachment can expand a contractor’s business and provide growth opportunities, it makes more sense to make the investment. Contractors should also consider the added versatility of multifunctional attachments—4-in-1 buckets, etc.—that can increase efficiencies and help grow their capabilities in other ways.
The bottom line is that any type of fleet-expansion decision requires careful consideration and planning, and investing in attachments or other ancillary components is no different. If selected properly, attachments provide greater versatility and profitability. When evaluating attachments and other ancillary systems that can meet project needs or help grow and expand a business, equipment owners should focus on tools that provide the best return on their investment, and enhance the productivity of their operation over time.
(The previous article “Rent Vs. Buy: Attachment Edition” was archived on December 12 2017 via http://caseatwork.com.)