I recently got into a discussion with a friend about the economics of buying a large piece of equipment versus hiring it. The ’buy-versus-hire’ discussion has been around for a long time, and inevitably gets raised whenever business is good and interest rates are favorable. I might be biased but here are my seven reasons for hiring equipment rather than purchasing it outright.

 

Buying equipment requires commitment

Signing up for something like a new excavator usually means committing yourself to at least 36 months of  regular payments irrespective of whether you’ve got work for it or not. In a continuing Covid-19 environment it’s a risk without clear certainty. Business these days is risky enough: hiring what you want and when you want eliminates that financial commitment and provides more flexible cashflow.

 

Projects are temporary

Each construction project or each job has a defined start and finish time. There are days when you need something for extended periods and days where the expensive piece of kit sits idle, costing you money without producing any financial return. We worry about gear that sits in the yard for more than a few days. It’s a worry you shouldn’t have think about.

 

Construction projects are mobile

Every new project requires some type of relocation to the new site, so the equipment needs to be mobile. The only exception I could think of was mining, where the vast majority of earth moving equipment probably remains on the site for the life span of the machine. Everything else needs to be moved from one project to the next, and there’s an associated cost to the moving time. It’s that time when it’s costing you money but not earning you a return.

 

No need to worry about preventative maintenance

The great thing about hiring equipment is that it’s always clean, greased and ready to go. There’s no need to factor in down-time for servicing or repair costs, and breakdowns aren’t your problem.

 

Costing is easy

Like most hire companies we list our prices on our website, so you’ll be able to cost jobs more accurately. There’s no need to stuff around with depreciation, service costs and amortisation. You’ll know exactly what the equipment cost you per project.

 

Hire exactly what you need

Using excavators as an example again, I think it’s fair to say the 1.7MT excavator is the most popular excavator in the market. While these are certainly great machines (and we’ve got a few) often you need something bigger or smaller. I’ve seen too many guys battle on with a 1.7MT machine (cos they own it) when a 2.5MT or 5 tonner would have knocked the job off much quicker.

 

The money is better spent elsewhere

Unless machinery is being used constantly, it’s hard to ensure it’s always working for you and making you money Depending on your circumstances, the money tied up in machinery could often be better utilised in some other form, such as cash flow, raw materials or paid out to be used for fun stuff like home renovations or a new jetski or boat. What would you rather own?

 

Most of our customers who continually hire equipment from us are focused on doing what they do best, whether it be construction or civil engineering or whatever. The smart ones run ‘lean-and-mean’ and have become really successful by spending money where it gives them the best return. You don’t need to have your cash tied up in fancy gear to be successful.