Renting vs. Purchasing – What is the best approach when it comes to spending company capital on tools and equipment; renting vs purchasing? Here is a tip for those of you facing this decision. When determining whether it is better to buy or rent an item, check your records and see how many times in the last year you have needed that particular tool or piece of equipment.
- If you have used an item 24 days a year or less, you should continue to rent it.
- If you have used an item 25 days a year or more, you know you will have continued use for the item, you should buy it.
You can check the value of this advice. Go into the area where you keep your tools and equipment. If an item has dust on it, you probably could have rented it instead of buying it. If you are using a tool or piece of equipment more than 25 times a year, chances are that it will not collect dust between uses. Of course, there are exceptions, such as seasonal equipment like heaters or pipe-thawing machines.
Another exception would be if the cost of renting a piece of equipment for the length of the job exceeds the cost of the purchase. In this situation, you are almost always better off purchasing the equipment, even if it is only required for that one job. You can always sell it later and recoup much of the purchase cost.
If you have been in business for more than two years, you probably already have most of the basic tools you need for the work you do. If you are not going to work on jobs yourself, but either hire employees or subcontract the work out, make sure the people who are doing it have their own tools. Why should your company take on the expense of someone else’s tools for the trade? You don’t need an employee who will always be trying to borrow other employee’s tools. That issue should be thoroughly covered in your employee manual.
Repair or Replace that Tool?
Nothing lasts forever, but frankly, when it comes to equipment you have spent good money on, it would be nice if it lasted a bit longer.
Equipment always breaks down when you are using it on a job. You don’t want to stop progress on the job, but any decision to make a major purchase shouldn’t be done in a rush. So at that point, it is generally best to rent a replacement while you consider your options.
As a rule of thumb, if you have owned a tool or piece of equipment for more than two to five years, you are better off purchasing a new one rather than trying to repair it. It is often hard to find parts for older equipment, and purchasing new allows you to take full advantage of improvements in technology that will benefit your production.
However, consider the added cost will impact your markup before deciding to purchase, research your options first, there is a great deal of information available online. Be sure to check online sites such as Craigslist or eBay for “gently used” equipment at greatly reduced prices. It is riskier to buy that way, but sometimes the cost savings can make it worth the risk.