Questions to Ask When Considering Buying or Renting Construction Equipment

Whether you’re an established construction company or just starting out, you’re probably wondering: should I buy or rent construction equipment? Our video presents several factors that companies should consider in their decision-making process:

• Exit Strategy for Equipment: It’s important to have a plan for the equipment after a job is done, considering whether it will be sold or stored for future use.
• Equipment Mobilization Costs: For out-of-state work, compare the costs of mobilizing owned equipment against the delivery charges of rented equipment.
• Maintenance and Opportunity Costs: Owning equipment requires maintenance, and having it out of state may limit its availability for other projects.
• Advantages of Renting: Renting allows for using newer models with the latest technology without the long-term commitment of ownership.
• Cost Tracking: Owners should track equipment costs accurately, including depreciation, maintenance, and interest, to understand the true cost of ownership.
• Tax Implications: Purchasing equipment may offer significant tax deductions through depreciation, whereas renting costs are expensed as incurred.

Watch our video or read the transcript to get all of the details to help you decide on whether to buy or rent construction equipment for your company.

To Buy or Rent Construction Equipment: Transcript

Hi, contractors! Kristin Bailey here, CPA and certified construction industry financial professional at KatzAbosch, a CPA and consulting firm that specializes in construction contractors. In this current environment, it’s almost impossible to find trucks and equipment, and we get asked a lot: should a company rent or buy?

While there’s no one-size-fits-all answer to this question, here are some items to consider when you’re thinking about buying equipment for a specific job. You want to make sure you have a good exit plan for that piece of equipment. 

Are you going to sell it when the job is done? Are you going to store it until you need it again? Currently, it’s easy to sell unused equipment, but that has not always been the case, and you don’t want to get stuck carrying equipment during a slow period because you can’t resell it or use it on other job sites.

You also want to make sure you factor in equipment mobilization. If your company does work out of state, you’ll want to evaluate the cost of mobilizing your equipment versus having a rental company deliver it to your job site. 

You also want to consider the cost of maintaining your own equipment on that job site out of state, as well as the opportunity cost of having your equipment out of state and not easily accessible.

Renting equipment does allow you to upgrade your fleet to the newer models quicker, allowing you to take advantage of new technology. But if you do own a substantial amount of equipment, you want to make sure you have a good cost tracking process to measure the true cost of the equipment. You want to make sure you’re accounting for depreciation, interest, repairs, and maintenance, and then allocating this cost to your jobs based on equipment hour usage.

Tax-wise, if you purchase the equipment, you might be able to write off the entire cost of the equipment in the year it was purchased or placed in service. Now, this can add up to some pretty large deductions. If you are renting equipment, you expense their rental payments as they’re either paid or incurred, depending on your tax method.

Lastly, there’s a big change coming to the financial statement presentations for long-term rentals, so you can hear all about that in another video. So, follow the link below to hear more on that topic. See you next time!

Whatever you decide when it comes to buying or renting construction equipment, we hope you find this educational video from KatzAbosch’s Construction Service group beneficial. As mentioned in today’s video, below is a link to our recent video on Changes To Financial Statement Presentation For Leases:

• Kristin’s Construction Corner: Changes To Financial Statement Presentation For Leases

If you would like to learn more about our Construction Service Group please click here.