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Because the equipment rental industry is a new force in our economy, few businessmen are yet trained to make sufficiently complete analysis of all costs pertinent to deciding whether to buy or rent. Too often the user of equipment merely compares the dollar cost of renting with the cash price of buying. He fails to realize that the true cost of purchased equipment, during its economic life, will be many times its initial cost, when maintenance and other factors are considered. Practical considerations of whether to rent or buy include:
1.
MAINTENANCE
2. BREAKDOWN
3. WAREHOUSING
4. MOBILITY
5. COST CONTROL
6. INVENTORY CONTROL
7. DISPOSAL COSTS
8. OBSOLESCENCE
9. CORRECT EQUIPMENT FOR THE JOB
10. MINIMUM EQUIPMENT REQUIREMENTS
11. PERSONAL PROPERTY TAXES AND LICENSES
12. CONSERVATION OF CAPITOL
13. INCREASES BORROWING CAPACITY
Equipment rented on a day-to-day basis includes full maintenance. The user of such equipment needs no repair shop, no spare part supply, no mechanics, and no parts supply inventory or maintenance records for it. It is important that all these costs be added to the cost of owning when deciding whether to rent or buy.
2. BREAKDOWN^return
to list
There are costs related to breakdowns of owned equipment which are not
applicable to rented equipment. Virtually all equipment is subject to
occasional breakdown in use. When rented equipment breaks down, it is
immediately replaced by A Rent-all Shop, Inc. at no cost to the user.
Time losses on breakdown of owned equipment as well as the cost of the
repairs themselves must be considered.
3. WAREHOUSING^return
to list
Warehousing facilities are seldom needed for rental equipment. This aspect
of renting has made it possible for some contractors to operate successful
construction businesses with little more overhead than the cost of a telephone
answering service, by having equipment rental yards serve as their warehouses.
4.
MOBILITY^return
to list
Equipment rentals offers the contractor or other user a mobility that
could not exist with owned equipment. A contractor, for example, can bid
on a job several hundred miles away, secure in the knowledge that he will
find the equipment that he needs at a rental center near his job site.
Before the rapid growth of equipment rental centers, a major argument
in favor of owning equipment was availability and convenience. This has
now become one of the strongest arguments against owning, since rental
facilities are now almost universal.
5.
COST CONTROL^return
to list
Better cost control is possible with rented equipment. Knowing the true
costs of equipment owned is difficult. Rented equipment offers the user
just one accountable cost figure-that shown on the rental invoice.
6.
INVENTORY CONTROL^return
to list
Another advantage in renting is inventory control. Contractors in particular
often find that they have less inventory shortage due to theft when equipment
is rented rather than owned. The presence of continuous billing on any
rented item tends to establish accountability for that item. The contractor
who owns a great deal of miscellaneous equipment has a difficult time
establishing personal responsibility for any of it. However, rented tools
which must be returned are watched with sharper eyes.
7.
DISPOSAL COSTS^return
to list
It is easy to overlook the cost of disposing owned equipment. It costs
money to sell any type of used or obsolete equipment. Preparing the equipment
for resale, advertising and selling time are cost factors of ownership
that do not occur in renting.
8.
OBSOLESCENCE^return
to list
Day-to-day renting eliminates equipment obsolescence for the user. Faster,
safer, and better equipment is constantly appearing in today's market.
Ownership involves the risk of being handicapped with equipment that is
slow, unsafe and inefficient when compared with newer models.
9.
CORRECT EQUIPMENT FOR THE JOB^return
to list
Ownership often forces another kind of inefficiency through use of the
wrong size or type of equipment for a given job. Even though the equipment
is not obsolete, this can also mean additional hidden costs. Renting insures
the correct equipment for the job.
10.
MINIMUM EQUIPMENT FOR THE JOB^return
to list
Equipment ownership is not cost effective when equipment is idle. When
ownership, of basic equipment is combined with rental as needed equipment,
idle time is minimized.
11.
PERSONAL PROPERTY TAXES AND LICENSES^return
to list
There are no personal property taxes or license costs for the user of
rented equipment. On owned equipment these are substantial costs, which
must be added to the cost of owning rather than renting.
12.
CONSERVATION OF CAPITAL^return
to list
Renting conserves capital. It frees capital for other, potentially more
profitable uses than that of being tied up in equipment.
13.
INCREASES BORROWING CAPACITY^return
to list
The equipment user who rents rather than buys generally finds borrowing
easier because he has a better ratio of assets to liabilities, as the
equipment does not appear as a liability on his balance sheet. This means
that his normal line of bank credit is not disturbed. Contractors have
found this most important in securing the bonds necessary for construction
work .
Simply stated: when tools or equipment are needed for consistent use throughout the year, buy or lease them. When a need is for an hour, a day, a week,a month, or a season rent them. When in doubt, study all the costs of buying, leasing, or renting-and be guided by what is most profitable.
ELKIN, NC 28621
(336) 835-7368
(336) 835-RENT
(336) 835-9295
Fax
eMail: allstarrentals@rivercto.net
