Determining whether to rent, lease, or buy your material handling equipment can be a difficult decision. The right answer for one company may not necessarily be the right answer for yours. It’s important to take into account your application, financial situation and production workflow before making a decision. The following information outlines the benefits and disadvantages you can expect from each option and when each option is appropriate for your company.
WHEN TO RENT
Renting is a great solution for companies that need equipment for a short period of time or when unanticipated circumstances arise. Common rental situations include:
- current equipment breaks down
- there is an unexpected increase in demand
- specialty projects crop up requiring a larger capacity or for unique products
- wanting to try the equipment before buying
If your company can’t afford any unexpected maintenance costs, renting may be a good option as the supplier usually covers these expenses.
ADVANTAGES OF RENTING
One of the benefits of renting is high flexibility. If your company’s situation changes, you can simply return the equipment to the supplier. For companies that either don’t have access to a large amount of capital or want to preserve the capital they do have, renting is beneficial as there is no capital financing required.
DISADVANTAGES OF RENTING
One aspect to be aware of when renting is any usage restrictions that the supplier may impose. These restrictions differ between suppliers so you may want to get the full details before you make your decision.
WHEN TO LEASE
Companies may want to consider leasing for a multitude of reasons including:
- needing the equipment for more than 1500 hours per year
- experiencing predictable utilization
- not wanting the commitment of owning the equipment or a fleet
- having flexible options in case needs change
- wanting the latest, state-of-the-art equipment
- preferring to preserve capital
ADVANTAGES OF LEASING
Reducing risk is a huge benefit to leasing. There is no ownership responsibility and after the lease period has ended you don’t have to deal with reselling the equipment. Companies that need flexibility and the latest technology can get it with lower cash outlay. Leasing is a popular choice among many larger companies and there are many types of leases available. The right one for your company is dependent on your needs and equipment usage.
Often suppliers will work with you to create a lease structure that fits your needs. For example, you may be able to add the cost of maintenance and attachments to your lease payments. A lease payment estimator is available here.
DISADVANTAGES OF LEASING
While leasing has many benefits, it often comes with usage restrictions. Like renting, the exact parameters of any restrictions vary by supplier. Take care to be aware of usage restrictions and your usage needs before choosing a lease agreement.
WHEN TO BUY
Owning equipment is common for companies that:
- need a very specific type of equipment (not available in local rental or leasing markets)
- experience a low, predictable workflow with few fluctuations
- use the equipment for less than 1000 hours per year
- have excess capital
- do not have a severe environment or application
Generally companies that are looking to buy should be able to use the equipment for 7-10 years.
ADVANTAGES OF BUYING
While buying carries more risk, there are certainly benefits for companies that choose to own their equipment. Unlike leasing and renting there are no restrictions on use. Additionally, with low, predictable utilization and when properly maintained the equipment will hold a residual value. After its useful life at your facility the equipment can be resold.
DISADVANTAGES OF BUYING
Along with increased risk, buying your material handling equipment rather than leasing or renting will result in a large initial cash outlay. Your company will have to determine if its application and potential usage hours justify a large purchase.
Renting, leasing, and buying each have multiple benefits, however it’s important to choose the one best suited to your company.
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