The American construction market is expected to grow 2.6 percent
That’s good news.
The bad news? That prediction was from a May 2019 article on Arcadis.com.
Unless a person has been asleep for twenty years, it’s hard to miss the multiple versions of chaos taking place in America.
What’s not hard to miss is the need for construction companies to watch the dollar closer than ever before.
What are the smart construction companies doing to maintain a steady sail in the economic storm? They are taking a financial inventory of their business, starting with looking at the Return on Investments and rethinking their heavy equipment acquisition methods.
What is ‘ROI’?
Entrepreneur defines ROI as a profitability measure that evaluates the performance of a business by dividing net profit by net worth.
ROI isn’t the same as profit but rather deals with the money you invest in the company and the return you get based on the net profit.
When calculating ROI, label the cost of heavy equipment rental as an investment instead of just a price. While the cost may be substantial, returns on investment are pervasive. Do it right and the ROI can be enjoyed for a long time.
“Doing it right” means starting with a complete analysis of your currents needs and taking into consideration any future plants.
An analysis of the type of equipment you already own, the mix of rentals you need, type of customers — government contracting, construction, or power projects, and so on — review what competitors are doing and take a look at the changing market conditions to determine what equipment is available for the project at hand.
In finding out whether renting is better than buying, find out the periodic cash flows under various options and discount them using the after-tax cost of debt to see where the present value of the cost of renting stands as compared to the present value of buying.
Costs of Disruptions
Changing from your current heavy equipment inventory model to an updated model which includes rental equipment may cause minor disruptions in current operations. Talking with a technician from Green Equipment Rental of Miami can help find the correct path to move from a heavy equipment-owned base to a new model and do it with minimal disruption.
One of our trained customer service technicians can help you get the details of heavy equipment costs, resulting in an accurate estimate of time and expense metrics.
After-tax Cash Flow
Calculating cash flow with renting is simple. Most rental agreements involve regular fixed payments and maybe an optional one-time terminal payment.
The cost of insurance needs to be accounted for and rental payments often have related tax shields which are permitted as a deduction from the business's taxable income. The result of net tax liability is a decrease in the net tax liability of a company.
The largest component of cash outflows when purchasing equipment is the payment. However, if a business acquires a loan to finance the purchase, the loan repayment costs must be considered besides maintenance costs, insurance, and other payments which are the nature of the beast using heavy equipment.
Transparent and Honest
If they do an honest and crystal clear cash flow analysis of both options — renting and buying — the reasons to rent become clear. These include:
Several reasons to rent vs buy include:
The opportunity to try newer models
Try new opportunities
Green Equipment Rental is able to help customers with just about anything and meets needs across many industries. Our regularly maintained inventory includes:
Compact Track Loaders
Beyond the obvious things to think about when deciding to rent vs. purchasing equipment, keep in mind non-monetary costs such as safety, efficiency, morale, employee retention, growth, and business risks.
It’s not always about the hard numbers when it comes to making the right decisions for your business.
Different rent or buy decisions vary by company types and needs.
Disclaimer: The information provided in this article is for informational purposes solely and does not constitute financial, business, or legal advice. Always contact a professional for your specific needs and circumstances before making any legitimate, business, tax-related, or professional business decisions.
Call to Action
We rent a large variety of construction tools and equipment for all buildings, landscaping, and renovation needs. We are unique in that our customer can do their entire rental online without having to go to a rental store. We offer FREE DELIVERY AND PICK UP within most metropolitan city limits.
Green Rental Equipment provides the heavy equipment rentals you need for fast and easy work on any construction job. Be it a residential or commercial project, our affordable earth-moving machine rentals are ideal for both professionals and homeowners alike. Our services include:
Heavy equipment rentals
Heavy equipment attachment rentals
Delivery & pick up
Guaranteed lowest rates
Our goal is to provide a consistently convenient and stress-free rental experience for our valued customers! And if you’ve been asleep for twenty-years, our rental experts can help get you up to speed quickly.
Contact us today to speak to a service representative about renting, or investing in, environmentally friendly heavy equipment.
You’ll find we have competitive rates and work to ensure the profitability of your project. Our rental equipment is available for projects of any duration
We appreciate our customers and we keep to the highest standards of quality in everything we do.
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