Size, versatility and endless attachment options make mini excavators a go to for many contractors. Nonetheless, the “rent or buy” decision making can be head scratching. Business plans, emergent opportunities, the lure of shiny new equipment and market conditions all factor in. Read on for advice.
It Depends…
This much is certain: there is no one right answer to the perennial “rent or buy” dilemma contractors confront. When it comes to mini excavators, on average: “About 25% of contractors choose to rent their mini excavators, while 75% choose to buy the machine. Some businesses get the best of both worlds by purchasing the mini excavator size class they use most frequently and renting additional machines during busy seasons to supplement their fleet.” According to Jeff Pate of Yanmar, one consideration that contractors may lose sight of when researching options is inventory:
Just as it’s important to examine factors such as market conditions when determining whether to rent or buy a mini excavator, it’s also helpful to have a good understanding of inventory. Supply chain issues can have a negative impact on availability. This can influence the purchasing decision based on what is currently available from the manufacturer. It’s worth reaching out to trusted dealers to discuss options or to learn about different rental and purchasing options. It also pays to look into the manufacturer and learn about their reputation. Are they known for reliable equipment and warranties that back their promises? That’s a sign their equipment is worth the commitment – whether that be for rental opportunities or investing in ownership.
Key to making a rent/buy decision is carefully assessing utilization needs. In addition to being a waste of money, equipment that sits on a site unused can be damaging to a contractor’s reputation and ability to win more work. As Pate advises:
Assess the utilization needs before deciding to buy or rent a mini excavator. If this is a short-term task and the machine won’t have many uses afterward, renting can be a better choice. To better understand what qualifies as a short-term task, estimate the machine’s annual hour usage and the amount of revenue that it would generate. Is that significantly less than what it would cost to buy the mini excavator? If so, renting may be the best option….There are several reasons an operator may choose to rent a mini excavator instead of buying it. With a relatively low upfront cost and flexibility to return the equipment at any time, contractors can reap many of the benefits that come with owning a mini excavator. Whether it’s to save money during a slow economic period or to increase productivity on a quick-turn project, certain conditions warrant a strong rental consideration.
Making smart rent/buy decisions also requires good financial intel and a plan for winning more work, and Colonial Surety is here to help. Once qualified for The Partnership Account® for Contractors, builders position their companies for ever more success with:
- a surety line of credit—in writing;
- a private digital dashboard;
- a daily snapshot of single and aggregate limits
- the ability to update work on hand—and increase your aggregate.
In addition to all this, Colonial gives you power of attorney to issue your own bid bonds. With The Partnership Account® on your side, you’ll win more work than ever.
Learn more and pre-qualify for a Partnership Account® Today
Invest Wisely
Although flexibility and up front savings often make equipment rental a solid choice, some circumstances make strategic purchases the way to go. Pros suggest:
Similar to determining if renting is best, it’s important to look at the big picture when considering buying compact equipment. Buying often comes with financing payment cycles that can last several years so looking ahead at future utilization opportunities is critical to determining return on investment. For example, if the monthly bill for the equipment is $1,200 and you’ll be working enough billable hours to cover that cost or more each month, buying is likely the best long-term choice…..For contractors who know buying a mini excavator is in their future but can’t get financing upfront or don’t know which model to buy, rent-to-buy programs can be an ideal solution. These programs allow contractors to start using the equipment right away and rent until they get approved for a loan or find the right model that they want to invest in.
Strive For Balance
Whenever making decisions, successful contractors prioritize the importance of a strong balance sheet. Toward that end, finance expert Garry Bartecki offers this perspective on the rent/buy dilemma: “CapEx expenditures need to be carefully considered before you sign your name to the contract.You may want to ask the rental companies you use to rent you one of these new products to see how it works before you commit to a purchase.”
As you continue to think forward about new ways for your company to win, don’t forget: Colonial Surety is here to help with a surety line of credit and the value added business services of The Partnership Account® for Contractors. Once qualified, you will use our powers of attorney to issue your own bid bond—and you can do so right up to the last moment you need it. With Colonial, owners also have a private digital dashboard, providing a day to day snapshot of single and aggregate limits, as well as current and available bond capacity. As work in progress decreases, work on hand can be updated, increasing the aggregate. The result? Yes, you can keep moving forward. Let’s get you growing today:
The Partnership Account® for Contractors
Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed.