Should you rent or purchase tools or equipment for your construction business? Here’s a simple rule to follow:
- If you are using the tools or equipment more than 25 times each year (once every two weeks or more), it makes sense to buy.
- If you are using them less than 24 times each year (less than once every two weeks), it makes sense to rent.
This changes depending on the price of the equipment or tool, and on the cost of maintenance. But don’t buy something just because it’s needed on one or two jobs, and don’t rent equipment or tools that you are continually using.
If you want to look at it another way, figure out the cost of the equipment you need. Then estimate how many times each year you will use it. If the cost of the equipment is less than the rent, buy it. If the rent is less than the cost, rent it.
Use common sense and analyze each situation. If the nearest equipment rental company is 45 miles away, then that puts a whole new perspective on the situation. Also, the type of equipment you are considering is important. Jackhammers have a rough life so they won’t hold up as long as a piece of scaffolding. Dollar for dollar, it’s usually better to rent a jackhammer and let someone else deal with the wear and tear.
Here’s one way of telling if you should have purchased a particular item. Go to your storage area, wipe a clean cloth across the equipment or tool and see how much dust comes up. If it’s dirty, you haven’t used it in a while and probably shouldn’t have purchased it. Yes, there is seasonal equipment like heaters and dehumidifiers that can get dusty, but that is not what we are talking about. How about selling tools and equipment that aren’t being used often? Use the proceeds to pay off debt.
Tying up money in tools and equipment that seldom gets used because you “don’t have the time to go to the rental agency”, is false economy.
The knowledge and experience Michael Stone gained in his 60+ years in construction has helped thousands of contractors improve their businesses and their lives. He is the author of the books Markup & Profit Revisited, Profitable Sales, and Estimating Construction Profitably, and is available for one-on-one consultations.
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