Factors to Consider During Construction & Heavy Equipment Financing
A time may come when one wants to carry out construction or needs heavy equipment.
Depending on several factors, the decision on which financial path to take, such as purchasing or renting heavy equipment is very important.
One must evaluate their or their company’s current situation and abilities, plans for the future and carefully take into consideration which way of obtaining equipment or carrying out construction is most beneficial.
Construction and heavy equipment financing is very critical and is influenced by several factors.
Current financial state
The current financial state can determine whether it is possible to purchase equipment immediately.
If purchasing is not possible then renting may be an ideal solution for the present however one must remember rental costs may increase quickly and over a long time, it could be more expensive.
One can lower the initial financial blow of purchasing a piece of equipment through several methods:
- Purchasing good quality second-hand equipment: Normally, renting involves acquiring new and technologically up-to-date equipment.
- Purchasing used equipment that is properly maintained can be more cost-effective than purchasing new equipment and renting in the long run.
- Financing equipment purchase: Buying equipment over a long period of time lowers the strain on financial resources and may even be lower than some rental payments.
Cost of ownership against cost of renting
One must estimate and weight the various costs of owning against renting equipment and construction.
Ownership brings operational and maintenance costs, insurance and fees such as government licenses which vary depending on the type of equipment and construction.
Leasing is normally taken as an inclusive cost.
Costs related to renting may involve regular transportation of the equipment to and from the rental location.
Length of project or frequency of work
Project duration and job frequency can be deciding factors in deciding financing method.
For a short term project or when one needs a specific type of equipment for a one-time project, renting may be the ideal choice.
The downside to renting is that if the equipment is not utilized for the complete duration it is rented because of alterations in the job schedule or unaccounted for delays.
Then one is using the money on a piece of equipment which is idle and not returning its investment.
If one is working on a project for a long time or has several projects in the future, then purchasing is the ideal option because rental charges go up faster the longer the job goes.
Multi-purpose equipment such as trucks and forklifts which can be used for several jobs is ideal for purchasing as well.
Equipment available and usage
Owning an equipment means it is available all the time since it is under your control.
It is more convenient to react to various unforeseen alterations in projects and schedules, accepting jobs quickly and finishing projects with a lower chance of downtime.
Potential clients like to see that one is not only prepared to accept a job when they own equipment, but they are a stable and trustworthy company.
A rental business may lack the piece of equipment when one requires it.