The Science of Equipment Buy vs. Rent Decisions

Feb. 28, 2020
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Productive infrastructure worksites can require a variety of construction equipment types, from earthmoving equipment and trench shoring & shielding to generators and light towers. But too many contractors overspend on equipment because they don’t do adequate buy vs. rent analyses that would likely reveal opportunities to cut costs and preserve capital by renting.

These analyses can be time-consuming to conduct. What’s more problematic, companies may lack the historical data necessary to calculate, for each asset, the total cost of ownership (TCO) and utilization, the two critical variables that drive smart buy vs. rent decisions. The opportunities for potential cost savings are large enough that companies should find their way around these problems, even if it means partnering with a third party for help.

The crux of making data-informed buy vs. rent decisions is calculating TCO and comparing it to the cost of renting a similar unit for the amount of time it’s needed. That’s normally a pretty good quantitative indication of when it makes sense to rent instead of own, and vice versa.

Utilization is how efficiently a company is using equipment. Utilization reports allow a contractor to validate whether its utilization rates are improving or declining over time. Higher utilization means the asset, whether owned or rented, costs less per hour of use.

Saving money by understanding when to rent or buy comes down to having the tools and systems in place to effectively manage the company’s maintenance operation and measure utilization.

This infographic from United Rentals outlines five steps that can help guide contractors in making sound buy vs. rent decisions.