Construction Equipment – Buy, Lease or Rent
Construction equipment is also known as engineering vehicles. These heavy-duty vehicles are specially designed to carry out construction and engineering tasks.
The finance needed for buying construction equipment is arranged through an equipment leasing association. The construction market is buoyed by a boom in the construction business after experiencing a couple of slow years.
Only those corporations or smaller businesses who are flush with cash can afford to buy the construction equipment on an outright basis.
Renting or leasing is the traditional best option for contractors who do not have large reserves of cash. The contractors who could not afford to buy the construction equipment have these methods as an alternative arrangement. Renting of construction equipment is an option to face a short-term need whereas leasing is the option suitable for long-term needs.
According to a survey conducted by the industry, there is less desire on the part of the contractors to own construction equipment and they always go through reviewing the concepts – leasing or renting – to select the best option.
Leasing or renting should be seen as a forerunner to buying since it gives a chance to test the construction equipment without the burden of large cost or long-term investments. Normally the rental of construction equipment for six months leads to out right purchase to avoid the loss of equity investment.
In a typical example for a project with three contractors bidding for the work, the contractor with equipment owned outright has to consider only the interest amount spent on financing the purchase while costing the project.
Whereas a construction company which opted for leasing only has to consider the recurring monthly payments for leasing while making the estimate for the project. The contractor who rents the construction equipment has only to calculate the rent he is going pay and he is not saddled with equipment, which is not incurring loss when left unused.
Complicating the matters further, there are too many types of finance plans, with offers of a wide range of schemes beckoning the contractors with repayment terms averaging from 3 to 5 years. Manufacturers such as John Deere and Caterpillar have their own sub division for financing, which permit the contractors to lease the construction equipment directly from the manufacturers. These types of sources serve nearly twenty percent of the market.
Leasing opportunities are also offered by banks. Because of the inherent risk, most of the banks steer clear of the construction industry. Still around sixty percent of the financing of construction equipment is carried out by banks or companies affiliated to the banks.
