Buying vs. renting

James Irish, executive vice president, American Rental Association

When you consider whether to rent or purchase equipment, the best choice depends on the circumstances of your business and the length of time or number of times you will use it. If you don't use certain equipment regularly and its purchase price is high, then renting makes sense. By renting, you're paying for short-term equipment use-usually a small percentage of the purchase price.

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Factors to consider are the hidden costs of ownership that renting eliminates. For example, when you rent equipment, the rental center, not you, pays for maintenance. You don't lose money on downtime while repairing equipment because the rental store replaces it. And you don't lose money warehousing expensive, idle equipment. In this case, you save the money you'd have sunk initial capital, plus storage costs. Renting offers excellent equipment choices. Rental centers update inventory regularly because they must offer the latest technology to stay competitive. But when you buy equipment, it becomes obsolete as technology improves. You can rent specialized equipment to do a job correctly, rather than making what you have on hand to a job for which it wasn't designed.

Renting increases cash flow, cuts equipment costs and frees capital without increasing your debt ratio. You can placeyour capital in more profitable investments and increase your borrowing power with a better ratio assets to liabilities because rented equipment is not a balance-sheet liability. And here's one last advantage to think about: personal property tax and license costs don't apply to rented equipment.

Vic Medina, project coordinator, Service Dealers Association

Dealers of outdoor power equipment love to hear the words, "Why rent when you can buy?" Usually, however, they don't because renting is a practical and logical option in many situations. Many dealers are now offering rentals on some pieces. Don't bypass an opportunity to consider a major purchase, however. Under the right circumstances, buying could be just the right investment.

Making a major purchase does involve several issues to consider. Would purchasing create an opportunity to expand a particular "service" to other customers? Knowing who your customers are and what they need is important. Make follow-up calls after jobs. Encourage feedback. Come right out and ask, "Would you ever have a need for this service?" If you can line up even two or three jobs, it could pay for your purchase before your even lay out the cash.

Talk to your local dealer. Ask him about any special financing options that could carry the price burden until you establish revenue-generating work. Check into any end-of-the-season specials or even used equipment. He may even be able to get you connected with individuals looking for someone like you. Dealers can be a great source of referrals, so keep in touch with them. Above all, ask them about purchases you are considering. Reputable dealers will tell you how equipment performs, what repairs they tend to make on them (and how often) and their average life.

It may be easier to rent, but don't miss out on finding a niche market that could pay off big for your business. It may just take considering a purchase to realize it.

As a small-business owner, I have to rent larger pieces of equipment. I [own] all my mowers, which eats into my cash flow but invests in my business. Purchasing equipment with multiple functions diversifies my services to customers. But for one-time jobs, renting is more economical in the short run.-James R. Heatherly, owner, Heatherly Lawn & Landscape (Tipp City, Ohio)

I feel purchasing equipment is the way to go. By purchasing ...you have a sense of satisfaction toward the job...in terms of that perfect mowing and also leaning towards taking care of the equipment you have purchased. Owning equipment [gives you] a sense of accomplishment-Jason Fuchs, manager, Greenstar Lawn Care (Franklin, Ill.)

Rental for short-term use is a great way to go. For long-term use, purchasing may be more cost-effective. Rental for infrequent use provides the advantage of quality equipment at a modest cost. Purchasing quality equipment for long-term use gives low cost-per-use and reliable availability.-Ellis Megee, general manager, Smitty's Lane & Garden Equipment (Overland Park, Kan.)

We usually prefer renting equipment over buying it for several reasons. First, the convenience of having larger pieces delivered to the job site saves us in travel time. Also, someone else absorbs the cost of wear and tear and has to worry about the upkeep and maintenance of the equipment.-Jason Sears, estimator, Gateway Landscapes (Clovis, Calif.)

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