You have three main choices to consider when adding to your fleet: buying, leasing or renting. Which one is best for your business depends upon your individual situation. But here are some pros and cons to think about to help you make the right choice.
Buying builds equity
The main advantages of buying equipment is the residual or resale value and the asset depreciation that reduces your tax obligation. Once you’ve paid off the loan, you own the machine outright, and it becomes a valuable asset to your business. When the time comes, you can trade it in to reduce the cost of the next piece of equipment you buy. The only downside of buying is that your payments, upfront and over the life of your loan, will be higher because you are paying for the full value of the equipment.
Leasing lowers operating costs
With a lease you still agree to make monthly payments for a set period of time, just as you would if you were making loan payments on a purchased machine. However, with a lease, you’re only paying for the usage and depreciation of the machine, so your payments will be lower. Also, there can be no down payment, so leasing makes it easier to replace aging equipment with minimal capital outlay.
In addition to helping reduce operating expenses, leasing helps structure a more orderly and realistic schedule for replacing equipment before wear-and-tear and maintenance costs become too expensive. When the lease expires, you simply turn in the old equipment to your finance company. As a result, leasing is a more cost-effective way to keep your fleet stocked with relatively new machines.
Renting provides flexibility
Renting provides cost-effective access to equipment you only need every so often to perform jobs outside your usual scope. This allows you to bid on jobs you otherwise couldn’t compete on, and to expand your business base without a large capital outlay. It’s also a great way to try a machine before you buy, and to take advantage of the latest technology without suffering costly depreciation.
You can rent a machine for a day, a week, or a month—even up to one year. And your rental dealer will handle all the maintenance, which frees your budget for other expenditures. However, keep in mind that if you need a machine for, say, three weeks, it might be more cost-effective to rent it for an entire month.
Renting gives you greater choice
Having a good relationship with a well-stocked rental store gives you access to a vast array of complementary or support equipment. This can be very valuable if you are expanding your scope and going after those new jobs.
The bottom line is…if it’s a piece of equipment you’re going to use a lot, you’ll want to buy or lease it. If it’s something you’re only going to need for a short period or from time to time, it probably makes more sense to rent.
What’s your advice when it comes to leasing, renting or buying? Please post your comments below.
I am a Pre-Field Agriculture/Product Application Representative for Caterpillar. I recently graduated from North Carolina State University with a dual degree in Agriculture Business Management and Agriculture Science, concentrating in Leadership and Environmental Technologies. I focus primarily on the relationships between customers, dealers, and the product specialists for the Building Construction Products division. Growing up on a beef cattle farm, I have several years of machine operation experience and agricultural knowledge. Thomas Jefferson said it best in that, "Agriculture is our wisest pursuit, because it will in the end contribute most to real wealth, good morals, and happiness."
I am a Marketing Communications Specialist for Caterpillar with over twelve years of experience marketing the Cat brand to customers in Latin and North America. My goal is to arm customers with the information needed to make well informed purchase decisions; to maximize the value of Cat machines by using an array of Cat Work Tool attachments; and to minimize the total cost of ownership by using Cat parts and Cat Dealer service.
I am an expert Operator and Application Specialist for Caterpillar concentrating on products used in the construction trades industry. I operate, evaluate and train on Cat machines and Work Tool Attachments worldwide. I have a Degree in Agricultural Engineering, Craftsman Certified and was named Apprentice of the Year 1981 at the University of East Anglia, UK.
I am the National Association Manager for Caterpillar and have responsibility for customer associations and partnerships in multiple industries for Caterpillar. I have 12 years of experience at Caterpillar, and have spent most of those years in the field with dealers and customers around North America. I have always had a passion for equipment and find myself fortunate to be able to work with dealers and customers almost every day.
I have been with Caterpillar for more than eight years, working in various roles including a materials engineer, a filters product manager and my current position as a parts consultant. My job allows me the opportunity to work with Cat dealers and customers providing insight on how the use of quality filters and fluids results in better equipment performance and lower owning and operating costs.
I am the commercial/market consulting expert for all Caterpillar tires and rims with 14 years of experience. I provide guidance in the harsher work environments of mining and industrial/waste applications. Our goal is to turn our dealers and customers into knowledgeable and trusted resources with respect to tires and rims. Our group offers training, technical support and resources to develop a level of expertise within the Caterpillar value stream that is ordinarily reserved for tire companies and local tire service providers. Ultimately, we want to provide our customers with a total Cat solution from the ground up.
I am a Sales Support Manager for Cat Financial and have responsibility for ensuring that the right financial products are available to Cat customers who purchase, lease or rent to own. 8 of my 10 years with Caterpillar Financial have allowed customer and/or dealer interaction as part of my daily responsibilities including over 3.5 years as a Territory Manager. I take personal satisfaction in finding financial solutions that work for our customers and CAT dealers.
I’m a Telehandler Product Application Specialist for Caterpillar in North and South America. I have 13 years of experience, including roles in the field as a dealer service operations and technical support representative, and as a distributor business model consultant. My telehandler passion and focus is working with dealers and customers to maximize the versatility of the product through machine and operator training.
I am a Product and Application Specialist with over 35 years experience at Caterpillar. I focus on helping you to determine the best Cat machines, work tool attachments, and services for you to use in the building and general construction, landscaping, specialty trades, and agricultural industries.
I am a Senior Regional Insurance Marketing Manager with 16 years’ experience at Caterpillar Financial Insurance Services. I have the opportunity to work with 18 North American dealers providing risk management products and services that helps the Caterpillar Enterprise ( Caterpillar, Dealers and Customers) manage their business risk. Caterpillar Financial Insurance Services offers Extended Protection Plans for machines and engines, Physical Damage Insurance, Inventory Protection Plans, Dealer Property and Casualty, Risk Management, Marine Transit Insurance and Dealer Bonds.
I am a Filter and Fluid Marketing Consultant with over 14 years experience working at Caterpillar. My focus is to ensure customers understand the importance of using superior filtration and lubrication products in their equipment.
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