Should You Rent or Buy the Industrial Equipment You Need?

If you want your operation to be successful, you need a multitude of different types of industrial equipment at your disposal. Some of this equipment, including industrial air compressors, may be expensive, especially if you only need the equipment for limited purposes or for a limited time.

Fortunately, there’s an alternative to buying this expensive industrial equipment; you can simply rent it. Renting is typically much less expensive, especially upfront, but you’ll end up paying more for the equipment over time if you use it consistently over the long term.

This leads to a significant dilemma for many industrial manufacturers: do you pay a bit more now and own the equipment, or do you risk forgoing long-term savings and rent instead?

There Is No Simple Equation

We wish there was a simple equation, where you could plug in the numbers and make a definitive decision. For example, it would be nice to say something like “if the monthly cost of renting is less than X percent of the cost of buying permanently, you should rent instead of buying.” But this equation doesn’t exist. There are simply too many factors and variables to consider as part of your evaluation.

It’s your responsibility to review the potential costs, benefits, and complications associated with each hypothetical variation so you can put yourself in a position to make a better decision.

Factors to Consider

These are some of the most important factors to consider:

• Why you need the equipment. Take a moment to evaluate why you need this equipment in the first place. Is this something crucial to your organization? Is it something for which you need the best possible equipment? Or are you not sure how important or necessary this equipment is? The more uncertainty you have, the more you should lean toward renting.

• How you’re going to use the equipment. Is this going to be a daily staple in your organization? If so, you should lean toward buying. If this is something inconsistent or temporary, you should lean toward renting.

• How long you’re going to need the equipment. Perhaps obviously, you also need to consider how long you’re going to need this equipment. If it’s only a short-term need, you’re probably better off renting.

• The costs of renting and ownership. Calculate all the costs of renting and ownership. Make sure you also factor in the costs of maintenance and repairs if you plan on owning the equipment. This should help you determine what the most financially savvy move is going to be.

• The terms of rental. You’ll also need to consider the terms of rental. Will you be able to use this equipment the way you want? Will you be able to modify or customize it? Will you be able to cancel your rental agreement and purchase the equipment yourself if you decide to buy later? Generally, the more flexible the terms are, the better.

• The convenience of rental. Next, think about how convenient it is to rent this equipment. If there are significant logistical hurdles associated with renting, buying might be the better option.

• Maintenance requirements. You’ve already considered the costs of maintenance, but what about the time and planning? For certain types of industrial equipment, you’ll need thorough processes in place to keep it running.

• Potential resale value. If you buy this equipment and eventually no longer need it, will you be able to resell it?

• Available capital. Do you have the available capital to facilitate a purchase or are you currently low on funds?

• Potential long-term savings. If you decide to buy, how long will it take for you to break even? And what are your potential long-term savings?

• Tax benefits. Are there any tax benefits associated with ownership over renting?

A Simple Approach

If you feel divided after reviewing all of these factors, or if you simply have too many ambiguities to feel confident in your decision, there is a simple approach that’s available to you. You can simply start with renting the equipment, then upgrade to buying whenever you have the opportunity. If you go this route, consider renting with flexible, favorable terms so you can save money and have an easier time switching when the time comes.

Buying New vs. Used

One other quick note: if you decide to buy your industrial equipment, you can save a great deal of money by buying used. In many cases, used equipment is nearly as good as new equipment, but it’s much less expensive. If you’re low on capital, or if you’re just trying to be as financially efficient as possible, this might be the play.

Buying and renting industrial equipment are both viable options for most organizations. However, after reviewing all of the factors we’ve laid out, it should become apparent that one is a better fit for your organization than the other in this application.