How to Decide if You Should Purchase, Rent, or Lease Compact Equipment

One major decision contractors must make with compact equipment is whether to purchase, lease, or rent it. The types of jobs that the equipment will be used to perform weigh heavily into that decision.

“Half the skid-steers and track loaders in the industry are purchased flat out with cash,” notes Gregg Zupancic of John Deere. “Another 45% is done through financing. For the contractor who doesn’t have a lot of jobs needing the equipment, or if the jobs are sporadic, leasing is a good way to go because the contractor can trade out the machine for a different model after the lease period, which is typically about three years, or walk away from the lease without having to worry about resale.”

One major decision contractors must make with compact equipment is whether to purchase, lease, or rent it. The types of jobs that the equipment will be used to perform weigh heavily into that decision. “Half the skid-steers and track loaders in the industry are purchased flat out with cash,” notes Gregg Zupancic of John Deere. “Another 45% is done through financing. For the contractor who doesn’t have a lot of jobs needing the equipment, or if the jobs are sporadic, leasing is a good way to go because the contractor can trade out the machine for a different model after the lease period, which is typically about three years, or walk away from the lease without having to worry about resale.” [text_ad] David Caldwell of Takeuchi points out that leasing is a better option for contractors who want to conserve capital and free up funds for other company expenditures. “It’s a good alternative for folks who have seasonal work,” he says. “Setting payments for a certain length of time simplifies budgeting. Contractors can often find lease options that have flex-pay alternatives.” Reasons against leasing include potentially higher rates than purchasing equipment, Caldwell points out, adding that manufacturers “often have very attractive finance rates for equipment purchases.” Renting is another alternative to buying or leasing. “You use and pay for equipment only when you need it,” he says. “Equipment can be returned, which is great if a job falls through or business drops off. Equipment rental periods can be determined by amount of work a contractor may have, and the term can range from daily to weekly to monthly to annually.” Renting may preclude a purchase, says Caldwell, adding that the contractor can determine if a piece of equipment is right for the job. “It provides an opportunity evaluate a particular product or model before making a purchase.” Rental fleets typically feature newer and updated equipment, giving contractors the opportunity to try the latest features and technology, notes Caldwell. Budgeting is easier with a set cost per month, he adds. If equipment can be kept busy throughout the year, purchasing it the best option, Caldwell says. That assumes the contractor has a down payment and favorable credit score. Purchasing allows the contractor deductions through machine depreciation, repair, and taxes and interest paid. “That’s beneficial to an individual or company trying to reduce their exposure come tax time,” he says. Other factors to consider: Is it more financially feasible for a contractor to do maintenance in-house? What are requirements for hauling equipment from job to job? Does the contractor have the appropriate truck, trailer, and license to transport the machine?