Choosing between hiring or buying equipment often results in a bit of a dilemma for many businesses, and it usually comes down to one simple factor: money. Buying a piece of heavy equipment—such as an excavator—involves a pretty serious outlay, and therefore requires some consideration. Nobody wants to spend a large amount of money on their business without being confident that it will represent a positive return on investment.
So, is buying an excavator a good investment for your business? The short answer is yes. Let's look at some of the reasons why.
It's not ideal to be at the whim of a machine hire company. Without your own excavator, your access to one is therefore subject to availability. This could potentially result in an inability to take on last-minute jobs, and therefore end in lost income.
If you do manage to secure a rented excavator, you are now bound by the terms of the contract. Most companies are pretty reasonable and will allow for a little wiggle room, but if something on the job goes wrong and things get delayed, you could find yourself in a bit of a pickle. With the machine due to be returned on a specific date, there is a good chance the hire company has booked it for another customer soon after its return. So, if something causes your job to get bogged down, you'll find yourself having to make the decision to either return it before the job is done, or hold onto it and incur a hefty fee (and this probably won't ingratiate you with the hire company).
Owning your own excavator eliminates these issues as you'll have no obligations to anybody other than yourself and your company.
- Ongoing costs
There are ongoing operation and maintenance costs involved when using heavy equipment, regardless of whether it is owned or hired. Obviously, if you own your excavator, you are going to have to shell out for maintenance and servicing. But, even the hiring of machinery also tends to land regular maintenance responsibilities at the customer's feet. Furthermore, if damage is incurred as a result of misuse, the customer will be liable for the repairs. Either way, it's an undesirable situation, but at least if you own the equipment, your money is being pumped back into your own investment. If not, you're simply handing it straight over to somebody else.
- Suitability of equipment
When hiring equipment, you're restricted to what is available to you. Equipment hire is a competitive industry, so no doubt hire companies strive to offer better equipment than their rivals, but at the end of the day, you have little control over an excavator's suitability for the job at hand. Some companies may still be running older machines that may not be ideal for the task you have in front of you.
Of course, this may be a compromise you're willing to make if the upshot is that you save money in the short term. But buying new equipment means you can order exactly to your required specifications, with the exact attachments that best suit your business. While this may be a significant upfront cost, it will end up saving you time and money in the long run.
- Product support
Large investments come with good product support, which means that any issues relating to your new machine are taken care of very quickly. As a purchaser of new machinery, you get priority support unlike what you get as a renter, where the priority is the equipment rather than the customer. Heavy equipment dealers like us here at Boya Equipment understand that it is in everybody's best interest to ensure all the equipment we sell enjoys the best possible aftercare and support to keep it productive and profitable.
These are just some useful points to consider among many others if you’ve been asking yourself the question - is buying an excavator a good investment?
Upsides to renting
In the interest of fairness, it is worth exploring some of the upsides to renting construction equipment.
- No long-term commitment
Renting equipment gives you the ability to choose a specific machine to complete a job without making a long-term commitment to a specific size class. This means, for example, you won't find yourself having to use a large excavator you may have already purchased when a smaller one will do.
- Availability of capital
Renting can help to maintain financial fluidity during times of uncertainty, like what we experienced at times throughout 2020 and 2021. As a generalisation, a longer-term rental over multiple months will typically run 4% to 5% of the cost to purchase plus you avoid the sales tax required with outright acquisition.
- Some maintenance costs are covered when renting
If a rental excavator breaks down or is damaged due to misuse, then naturally the renter is liable for the repair costs. But, if a breakdown or failure isn't due to misuse, equipment replacement falls on the rental company. Some contracts may even stipulate that the rental company will also incur the cost of the downtime that is caused by the equipment malfunction.
- Tax benefits
When renting, you pay the bill after factoring it into the job, and you can later deduct it as a business cost. You therefore don't need to worry about depreciation, interest allocation or insurance.
What is the verdict?
Ultimately, making the choice between renting and buying is a decision that is going to require some consideration. Renting is probably easier and more cost-effective in the short term. However, purchasing equipment such as an excavator will contribute to your business in a way that renting simply won't. Plus, when you're ready to upgrade, you have a substantial asset that you can sell or trade which will make it much easier to expand your fleet as your business grows.
Consulting a business or financial advisor would be a good first step towards understanding the financial implications and benefits of owning such a piece of equipment. It's in your best interest to know exactly what the ins and outs are when it comes to this kind of purchase.
So, what do you think? Is buying an excavator a good investment? We would say absolutely yes for the reasons mentioned above. And luckily you’re not short of options if that is also the conclusion that you’ve come to.
Whether you are an owner-operator or contractor, Kubota has a wide range of excavators for sale to suit your needs. Our expertise in heavy equipment will help you make the right decision for every new machinery purchase, and make sure that your operational needs are turned into the smartest investments. Get in touch today to find out more about our range of excavators, plus our tractors for sale, and any other heavy equipment you may need to take your business to the next level.