Rent, Lease or Buy: Understanding Your Options when Acquiring New Equipment

by New member TreyAbston on ‎09-24-2015 10:38 AM

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Machine owners have multiple options when it’s time to add new equipment to their operations.  The most common are renting, leasing and buying. There are many factors to weigh when choosing the right solution. Cash flow, expected hours of utilization, maintenance costs, warranty offers, and other factors specific to your business should be taken into consideration.

 

There are benefits and drawbacks to any purchase decision, and a thorough understanding of your operation’s current workload and future needs is essential for making the right choice. Your local dealer is best equipped to explain all of the options and help you decide which one works best for you.

 

Here are some initial points to consider:

 

The Rental Market

If you require a piece of equipment that isn’t needed consistently or will only be used for a short period of time, renting may be the choice for you. Although machine availability may be limited based on dealer inventory, renting provides more flexibility for equipment owners. By owning fewer machines and supplementing with short-term rentals, you can tailor your equipment and operating costs to the needs of each job.

 

It’s also common to rent certain less-used attachments such as trenchers, cold planers and mulchers.

 

Lease Agreement

You’re an ideal candidate for leasing equipment if you have an established business operation and a demonstrated history of good relationships with lenders. Leasing makes business sense only if you can count on a workload that will support payments throughout the entire term of the lease.

 

Leasing solutions offer a lower monthly payment than rental rates and loan payments, with little or no money down. While this can be beneficial if cash flow is tight, your equity in the machine will build at a slower rate than a loan. This extended build up of equity does add to the total cost of ownership if you intend to ultimately purchase the machine when compared to a more typical loan structure.

 

Maintenance costs are another consideration, as the lessee is responsible for both preventative and unexpected maintenance expenses on leased equipment. However, this risk can be mitigated by adding a service contract through your dealer. It is important to note that the cost of a dealer service contract can be rolled into your monthly lease payment.

 

A lease allows you to keep your fleet updated with modern equipment with less variability in costs, since a newer fleet brings less risk of major maintenance expenses. When it comes time to replace the machine, end of lease options offer the ability to avoid the risk of price fluctuation in the used equipment market.

 

Utilizing rental and leasing solutions can make it easier to match your equipment costs to ever-changing business conditions. You can adapt your operations to your anticipated workload by combining a core group of machines that are used more consistently with rented or leased equipment used less often.

 

Outright Ownership

If you’re looking for a new machine because you have a consistent, long-term need for it, then buying may be the best option. Those that are considering equipment ownership often intend to keep the machine in their fleet for an extended period, with the expectation of some major maintenance costs to be incurred over time. A fully-amortizing loan offers the lowest total cost of ownership for the long term when compared to leasing or buying because it allows for equity to be built up more quickly. Although you are responsible for all ongoing maintenance requirements, asset depreciation may allow you to recover some of these costs. 

 

No matter which option you choose, your dealer can play a very important role in helping you make the most sensible purchase decision. Whether you need rental equipment ready to work at a moment’s notice, support for equipment you already own, or a blend of machine options to meet varying market demands, the partnership between you and your dealer is the key for building your business efficiently and profitably.

 

For more information, contact your Cat® Financial Territory Manager and your local Cat dealer, or visit us online. We’d like to hear your thoughts on equipment purchase options:

 

  • What is your experience with rented or leased equipment?
  • What are the most important factors when you decide whether to rent, lease or buy?
  • How does your decision whether to rent, lease or buy a machine depend on the size of the equipment you’re considering?
  • Which pieces of equipment are the core machines for your business? Which machines are most useful for supplementing that core?
  • How does your operation’s workload vary depending on the season? How do you use your decision to rent, lease or buy in managing operating costs as your workload changes?

Comments
by Sam Sonav
on ‎09-28-2015 01:43 AM - last edited on ‎09-28-2015 09:44 AM by Administrator

You have got a nice article .It tells when we can rent,lease or buy an equipment.But honestly when I first clicked on your blog I was also expecting some guidelines for acquiring equipment like well say you find a product interesting and  want to acquire,purchase it  but  not  sure  about  its  quality, its durability ie whether it would be good enough  then  what are the  things  that  you  can  do to  analyze its effectiveness  and  what  are  the simpler alternatives available to the common complicated equipments in  market. Like I was  browsing through net and came across products which are used for transfering loads ,formwork and other equipments and they appear to be pretty good but I also want to confirm their quality .And any simpler alternative if available( although these products do look pretty simple themselves). 

 

by New member TreyAbston
on ‎09-29-2015 09:37 AM

Thank you for taking the time to read my blog, Sam. I also appreciate your input on a future topic. I will pass that idea along to our Blog/Community Manager.
 

by Tinya Thomas
on ‎09-30-2015 09:00 PM
This is a very well organized blog and it made it easier for me to do my homework
by New member TreyAbston
on ‎10-01-2015 10:58 AM

Thanks Tinya. I am glad it was able to help you consider your options.

by sonja
on ‎07-24-2016 02:04 PM
Good day Trey. The information that you've put together has indeed been very helpful in my quest to lunching my project and knowing that getting a complete line of heavy machinery will very much be possible. Thanks to the wel coordinated team at Cat.
by Sonja
on ‎07-26-2016 07:53 AM
It's exciting to see how the array of heavy equipment machinery has been diversifying. Now utilizing construction machinery for farm work, the agricultural implements on the machines will indeed be beneficial in posing key to developing industries. Well done!
About the Author
  • I’m an Attachments Product Application & Sales Support Specialist for Caterpillar in North America. I have been with Caterpillar for five years including roles in the field as a dealer sales support representative and marketing support in the skid steer and small wheel loader product groups. I graduated from Iowa State University with degrees in Agricultural Business and Economics. Our goal is to provide a full portfolio of attachments for our customers to be more productive and versatile with their machines.
  • 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’m a Compact Wheel Loader Product Application Specialist for Caterpillar in North America. I have 11 years of experience, including roles in the field as a dealer technical support representative, and as a distributor business model consultant.  I graduated from North Carolina State University with a Mechanical Engineering Degree, and wanted a job where I didn't have to sit in front of a computer all day.  This job allows me to get out and get my hands dirty, with the goal of providing solutions to customers’ machine needs.
  • 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 am a Product Application Specialist with 16 years of experience in the industry. As a Building Construction Products Global Trainer, I focus on training dealers and customers on machines, attachments and applications as it relates to the construction, agriculture and landscaping segments.
  • 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 a marketing and sales support professional for Caterpillar. In this role, I work with our marketing and customer service teams to support or dealers and customers, concentrating on our Small Wheel Loader, Skid Steer Loader, Mini Excavator and Dozer product groups. The exchange of ideas, information and opinions about equipment and how it’s used in various industries on forums such as this blog helps me fulfill my role at Caterpillar to the best of my ability.
  • 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.
  • Jeff Brown is a marketing professional for Caterpillar Skid Steer, Multi Terrain and Compact Track Loaders. Over Jeff's 12 years in the industry, he has visited with and studied the needs of customers across landscaping, construction, and agriculture segments. Delivering innovative solutions that solve customer's problems is Jeff's main focus.
  • I am a North American Product and Application Specialist for Caterpillar. In this role, I have had the opportunity to represent Caterpillar at various trade shows and train customers on new Small Wheel Loader content. I graduated from Purdue University in 2001 with a Mechanical Engineering degree and have spent the past 15 years with Caterpillar in various engineering roles. Growing up in the Mid-West, I have always loved the cold and the unique activities winter enables. Unfortunately, I had to give those up when I moved to North Carolina. I don't care what people say, you never get used to a hot climate.
  • 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.
  • I am a Sales Support Manager with over nine years of experience in a variety of roles with Caterpillar Financial Services Corporation. Throughout my career, I have had the opportunity to gain experience in matching financial products and tailoring funding strategies to the specific needs of customers. This includes more than three years as a Territory Manager in Seattle partnered with N C Machinery, an authorized Cat dealer covering the states of Washington and Alaska.
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