Rent or Buy? Decide What’s Best for Your Business
Minn. contractor partners with his Terex® equipment distributor in making acquisition decisions
Written by: Amber Reed, Performance Marketing, West Des Moines, Iowa
Provided by: Terex Construction Americas, Southaven, Mississippi
The majority of equipment acquisitions can be classified into one of four categories: Rent, Lease, Rent-to-Own or Buy. Even knowing the different options available doesn’t mean an easy decision for contractors looking to add equipment to their fleets.
Rob Larson, director of the equipment and maintenance division for Anderson Brothers in Brainerd, Minn., says he considers a lot of factors before making the decision to rent or buy. “We own a sizable fleet of equipment,” says Larson. “We rent to meet the demands of particular project needs. We often do a rent-to-own contract, which allows us to become familiar and comfortable with the equipment before we purchase it.”
Anderson Brothers is a multi-disciplined contractor, specializing in municipal, commercial and residential infrastructure work, including earthmoving, underground utility, concrete and asphalt paving, aggregate mining and site development work in the Brainerd Lakes Region. Larson rents on daily, weekly and 6-month contracts from Brainerd General Rental, a Terex® compact construction equipment distributor and member of the American Rental Association in Baxter, Minn.
To make sure Larson is making the right acquisition decisions for his company, he sits down with Steve Mau, president of Brainerd General Rental, several times a year to discuss what types of projects Anderson Brothers has going on, to figure out what equipment they need to complete these projects, to learn about new equipment trends and to share best practices. “I need to be able to get the most done in a given amount of time,” says Larson. “I talk with Steve about our specific challenges and needs, and he gives me options and makes recommendations based on what’s best for my business.”
According to Mau, consulting with his customers is a critical part of the company’s business model. No matter if Mau visits his customers in the field or they come into the store, finds them online or at local tradeshows, every member of Mau’s team is fully trained to assist customers with their equipment acquisition decisions, evaluating their needs and recommending solutions.
“Our relationship with Anderson Brothers is a great example of how a successful partnership between the customer and the equipment distributor works,” said Mau. “Anderson Brothers’ folks in the field recognized that there were some applications where the ground conditions were soft or the site was undeveloped and that their current fleet of equipment wasn’t as productive or efficient. They came to us looking for alternatives, and we suggested they try compact track loaders on those projects.”
For Larson, Terex compact track loaders have offered his crews the versatility they need to handle projects in tough ground conditions. “Our commercial division uses the compact track loaders to do footings and site prep work, our residential division uses them for driveway work and our highway unit utilizes them for shoulder and ditch work. With the nature of our project work, we have three Terex loaders on long-term rental, and then we generally have three or four more units out on a daily or weekly basis.”
“The 67-in bucket attachment that comes with the rented loaders is perfect for the majority of work we’re doing,” continues Larson. “We have grapple buckets and brooms for our wheeled units, and because Terex units come standard with a loader-mounted quick attach interface, we can use our fleet of attachments on the rented track loaders as needed.”
So why does Larson continue to rent track loaders if his crews are utilizing the equipment so often? “The decision to rent or buy ultimately comes down to the cost of owning the equipment. With the economic downturn in the construction market these past few years, we have chosen not to own these units based on unpredictable utilization rates.
“Brainerd General Rental understands our business — Steve allows us to return before the rental or lease contract is up if the project needs change,” continues Larson. “And if any repairs or maintenance are needed on a unit, his team has another unit ready for us to use. And, they consult with us and give us options when we need specialized pieces of equipment.
“With rental, we have minimal downtime and a lot of flexibility to adjust to each project’s particular needs,” says Larson.
According to Mau, Anderson Brothers is not unique in their approach to renting versus owning. “Jobsites vary, which means the type, size and capacity of the equipment needs to vary as well. Renting gives contractors options to best fit their changing project needs,” says Mau.
According to Mau, when purchasing equipment, contractors have to factor in the cost of maintaining the equipment, as well as account for a unit’s deprecation costs over time. When renting equipment, contractors can build rental fees into their project costs. Renting also enables customers to free up cash, and it reduces the assets on their balance sheet.
Mau finishes, “Renting can be the more economical choice.”
SIDEBAR: Is Renting Right for Me?
Provided by Steve Mau, President, Brainerd General Rental
When a project requires equipment that you don’t have in your fleet, what do you do? Traditionally, contractors would go to their local equipment distributor and purchase whatever it is they need. Although this still may be a good option given a particular situation or application, more and more contractors are turning to the rental industry for help.
The American Rental Association has identified six reasons why renting may be a better option:
· Maintenance – Rental equipment includes full maintenance. There is no need for spare parts, a service bay or the time required to perform the much-needed work.
· Breakdown – If your equipment breaks down you could be out of work for days or weeks. If a breakdown occurs with a piece of rental equipment, simply return it and get a new one. This saves time and money.
· Obsolescence – Rental shops typically carry the latest equipment. For example, a lighter more efficient tool that can save you time and money can replace a larger bulky outdated piece of equipment.
· Correct equipment for the job – Are you using the right equipment for the job? Ownership might force you to use a tool that is the wrong size or type for the job, causing additional, though hidden, costs.
· Conservation of Capital – Renting frees capital for other equipment that potentially is more profitable.
· Increases borrowing capacity – Equipment users who rent rather than buy generally find borrowing easier because the business has a better ratio of assets to liabilities, as the equipment financing or debt does not appear as a liability on the balance sheet.
· Tax Implications – Do you want to depreciate a piece of equipment or expense the rental. Talk to your tax professional to see what option is best for you.
In the end, contractors need to ask themselves this question: Is this a piece of equipment that I will need on a regular basis and am prepared to keep it in good working order to reduce down time? If not, maybe renting is right for their business.
To learn more about the benefits of rental, visit RentalHQ.com.
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