Thursday 5 February 2015

BUY vs. RENT: The Never Ending Debate

There are lots of you out there who are still trying to crack their heads out on whether to buy or rent construction equipment. You better think fast before your business or whatever you are building out there lay down in crumbles. Axis Capital Group, a construction company located in Singapore (which now has branched out in Jakarta, Indonesia by the way) has listed some factors for you to think about for your construction material needs.

Factors to Consider:

1. Budget and Cost

This is the first obvious factor to consider. To start with, you have to make sure that you have the budget to consider both options. If you don’t have enough money to buy a new material and just starting up, you can consider renting for the meantime. Make sure you don’t invest in a scam, though. There are a lot of fraud businesses around nowadays especially if you have big bucks for a budget.

2. Duration of Project

If you are to use your construction equipment, consider the length of time you would need to use it for. Renting can be considered when you would only use it for a short period of time but if you are trying to build something consistently and would take time, say a decade to build, you may want to own your own equipment but make sure you purchase it from trusted quality brands and manufacturers. Axis Capital Group has a lot of high-quality brands that are guaranteed new.

3. Usage

The load and frequency of usage should also be considered. In infrastructure business, there are lots of tools and equipments that should be used for specific needs. It may be too expensive to own each of these tools but it may create a good impression towards your clients if they see that you own appropriate equipment for the job.

Buying Pros

1. Depreciation, insurance, repairs, taxes, and interest are deductible.
2. You can control it on your own terms. If you own the equipment, you can do whatever you want with it whenever and wherever that may be.
3. If the project is already done and you do not have the need for the equipment anymore, you can make money out of it by lending it to another company or trade it with something more necessary
4. Lower interest rate

Buying Cons

1. You should consider all the fees that you have to pay plus other fees such as government licenses
2. Maintenance and repairing cost should be considered after you have used the equipment
3. There are projects that need specific tools to be used. Owning an equipment doesn’t mean that you can get the work done immediately. You may need to purchase other equipment to finish the task.
4. You are also responsible for the storage and transportation of this equipment when not in used.
5. Equipment may become obsolete while you own it and the value can depreciate over time which can hinder plans of selling, trading or lending it.

Renting Pros

1. Renting equipment doesn’t require huge amount of capital. The money saved from buying the equipment can still be used to other purposes.
2. Very advantageous when the project is only for a short period of time
3. Renters can choose which rent subscription to get depending on the agreement with the renting company. It can be monthly, quarterly or bi-annually depending on the need of the equipment.
4. Renters can claim back the monthly rental amount as a business expense on their tax deductions.

Renting Cons

1. The shorter the rental term, the more expensive the rental amount will be per day
2. The renter has no control on the usage of the equipment. In case of issues that might be encountered during the materialization of the project, you may need to prolong the use of the equipment but can no longer use it when the contract has already ended.

Review all these information and decide which is better.

Axis Capital group has high quality construction equipment which you can either buy or rent to be shipped to you in no time. We are servicing South East Asia since 1999 and insure cost efficient equipment that meets your high standards.


No comments:

Post a Comment