6 tips to buy, rent or lease the correct heavy equipment

How to choose the most suitable industrial heavy machinery for your operation?

Selecting the right equipment for your construction, maintenance or transportation work may seem complex. Choosing well can save time and money, also know when to replace it or when the technology has already changed and there are better equipment in the market.

We have made this guide to help you choose new or replacement equipment. We dedicate most of this article to explore the key questions and concepts that must be taken into account, and the importance in relation to the appropriate provider.

Here the 6 tips to choose the correct heavy machinery

1. The costs of acquiring new equipment.

An important part of any decision to purchase equipment is the price, but the cost of acquisition is just one factor, combined with the costs of new equipment, operation and maintenance. Although many organizations only focus on initial capital costs, it makes more sense to consider the life cycle with their cost analysis.

Initial costs of the equipment.

The initial purchase cost of the equipment you are purchasing, on average, represents approximately 50 percent of the total cost that the machinery will incur throughout its life.

In addition to the base price of the machine, there are other initial capital costs that could include:

  • Taxes, although they may be deductible, must be considered in the cash flow.
  • Shipping costs, shipping insurance and configuration.
  • Rates for additional or extra modifications. Are the additional costs hidden within an operating expense versus capital expense?

Be sure to read carefully if a quote or technical sheet covers everything you expect to obtain, and that there is nothing hidden that you did not know. The assumptions are dangerous and can generate problems that can be difficult to solve after delivery, heavy machinery is a major inversion, and we must review all the details.

Property costs.

These are the costs that you incur annually even if you are not actively using your equipment. They consist of expenses such as: storage, insurance, licenses and financial interests of credits.

Operating costs

These include any costs associated with the continuous operation of the equipment, which is generally the cost of the fuel and the operator’s time. These expenses only accumulate when the machine is actually being used and will vary according to use.

Maintenance costs

The third type of costs that you need to take into account in your decision-making processes is those associated with ongoing maintenance. These are crucial, because regardless of the initial purchase price, maintenance and regular repair is where you will find yourself spending a substantial part of your budget throughout the life of your machine,

The maintenance costs could be:

  • Consumables, items or goods you need to keep your equipment in good working condition and that will be consumed in the course of your operation these include products such as lubricants.
  • Parts of greater wear (for example, leaves for plow, tires and bulldozers). In general, it will monitor and track these separately from the most typical consumables, such as hoses and filters.
  • Service, the costs of any labor and parts that are used to keep the equipment in good working order, or the hiring of a maintenance policy with a specialized company.
  • Remember that maintenance costs tend to increase as machines age. Keeping up with routine inspections, bitacoras and scheduled maintenance plays a critical role in helping your team last longer and function better.
  • All these factors combined must be considered in the expected life cycle of the machine, and must be compared with viable alternatives

2. Technical support and guarantees.

Find out what kind of assistance will be available after purchasing the equipment, as it is inevitable that your equipment needs service at some point in its useful life. For example, you can get a good offer on a machine used in an auction, but following this route can sacrifice the important maintenance and repair support available to you in the future if there is no local support.

Depending on your needs, support may include parties, service and potential lenders. You must ensure that both parts and service assistance are available and convenient for any maintenance or repair required in the future. Be sure to find out if the support offered is local: can the supplier fix your machine on site within a reasonable time, or should your machinery be shipped to another site?

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3. What role does the machinery play in your business?

It is important to consider whether new or used machinery is really necessary in your business in the short and long term. Is the equipment intended to meet your current needs or anticipate future ones? How will the new machinery affect your labor costs and available skills? Even if a new machine requires operator training or even new or additional personnel, and could increase your productivity and reduce long-term expenses.

Other factors to consider is the importance of the machinery for your business. Your answers to these questions will help determine the best option to acquire the equipment:

  • Should you buy new, reconditioned or used equipment?
  • Is it for your own use, or can you sublet?
  • Are you a subcontractor to another person who trusts you and this team?
  • Can you afford downtime if the equipment needs repair?
  • What does the acquisition say to the market?
  • Are you in the long-term business?
  • What size of equipment should you get?

You can often do a smaller job with a larger machine, but not the other way around. A larger machine, although it has a higher purchase price, often means higher productivity and lower operating costs.

Depending on your answers, you can decide if it makes more sense to consider it new or used. For example, if you really cannot afford downtime, consider new or rented equipment so you do not have to worry about the responsibility for maintenance or repairs. On the other hand, if the piece of machinery is absolutely critical for your company in the long term, it may make more sense to consider the ownership of a new unit instead of being used.

4. What are the financial options to acquire the equipment?

There are several financial factors that must be considered when acquiring new machinery. One of the first things you should think about is whether you should buy or rent?

To buy

If the equipment you need is a key and integral part that will be used routinely for your business, buying it makes more sense. It also provides operators with better knowledge and familiarity with it, learning their inputs and outputs so that they can maximize their performance and, normally, gives them the greatest degree of control over how, where and when they use it.

One of the biggest challenges with the purchase of equipment may be the required initial capital outlay, which is significantly higher than it would be with the lease or rent. In this case, financing and leasing may be available through the seller or from external financing companies. Considerations on interest, taxes and cash flow should be examined when structuring a purchase. Remember that the initial purchase cost is only 50 percent of the life cycle costs!

When it comes to buying, there is one more question you should consider: will you buy new or used?

New or used, pros and cons:

Pros

  • Keep up to date easily with the latest developments in the industry and technological changes.
  • Maximize productivity and maintain your competitive advantage.
  • The resale or exchange value will be higher than for a used machine.
  • Give security to your customers and competitors that you are here for the long term.
  • The warranty of a manufacturer for new equipment.
  • The financing is usually only for new equipment.
  • Buying used is a good way to save money, especially if it is used carefully and stays well.
  • It is more likely that the machines used are proven solutions that have a history of success.
  • Some suppliers guarantee a thorough inspection and product support for your used equipment.
  • You can know the used part well if you buy it from someone you know.

Cons

  • There are higher initial costs to buy new equipment.
  • The new machinery needs insurance, direct technical support from the manufacturer or higher maintenance policies, than the older equipment.
  • New equipment depreciates in value faster after the initial purchase.
  • New equipment may require external support for maintenance and maintenance.
  • Older equipment may be outdated and reduce its productivity.
  • The team may not be in good shape: make sure you work with a trusted provider to avoid surprises.
  • Financing is more difficult for the equipment used.
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Lease

The leasing of machinery requires a certain analysis.

  • The terms can be relatively flexible (generally between one and five years), but the rates will be more favorable than they would be for an extended rental.
  • It involves less money in advance since no large initial capital is required which gives you cash for you to work.
  • The landlord can be responsible for the maintenance according to the terms of your lease. Financial leases usually treat you, the tenant, as the owner (which means you are responsible for maintenance and conservation), while operating leases can maintain ownership and maintenance responsibilities with the landlord.
  • Leasing is also an easier way to update new models more regularly
  • There are tax implications of the lease versus the purchase, and this is where you should seek solid financial advice on the best means to proceed.
  • An important point is that interest rates and insurance for leases tend to be higher. If you need to return the equipment and terminate your lease in advance, the financial penalties associated with it may also be rigid, and must be fully understood ahead of time.

Rent

The rental of machinery can offer a series of advantages depending on the type of equipment you need and its intended use:

  • Rentals are usually offered on a daily, weekly or monthly basis, so you can use the equipment for as long as it suits you.
  • Reduced maintenance is required: you will not have to worry about in-depth maintenance or repairs, since those costs remain with the owner. In general, routine maintenance is the responsibility of the tenant, that is, the things that must be done to ensure adequate reliability (for example, lubrication and even oil changes if they are long-term).
  • Simpler storage: Having a machine in your possession for longer than necessary can create headaches related to storage. Keeping it on site can tie up valuable physical space, while storing it off site can be costly. With rents, you may worry less about where to store the equipment when you do not use it.
  • Try before you buy: Leasing a unit can give you more time and a greater opportunity for your staff (compared to a short-term demonstration) to evaluate a machine before buying or leasing or to differentiate between machine options.
  • One thing to consider is that the long-term rental rates can be very high, so be sure to choose the correct rates and the rental period from the beginning. If, for example, you need a computer for three weeks, it might make more sense to pay a monthly fee instead of the daily rental rates. Depending on how long you plan to use the equipment (for the duration of a season, for example), a short-term lease package may also be appropriate.
  • You may find that you are going to rent for longer than you thought, so consider a pre-purchase option that allows you to purchase the unit for long-term ownership or even to insure your capital so you can buy and resell it yourself.
  • Remember that rental rates are often twice the cost of ownership, so you cannot expect to make money on rent. However, it is a more productive means to evaluate a unit or perform a specific job.

Ultimately, your acquisition method will likely combine a variety of approaches for different considered teams. Depending on the needs of your company, you may have some main equipment, rent one or two pieces that you only need for a couple of seasons or a job, and rent more specialized pieces as needed. You can work with your suppliers to determine the arrangement that is right for you.

5. What will be the resale or commercial value?

You may need to sell or change your equipment at some time. You can drop a machine when a project ends and the equipment is no longer needed, when more specialized equipment is needed, or when your current model is old and you want the reliability and features of a newer model.

The main factors that affect the resale value are the brand, the physical conditions and the buyer’s demand.

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The brand:

Many buyers are willing to pay more for the equipment of a brand they know and trust. You may have more difficulty selling a used machine and getting a lower resale value from a lesser known manufacturer.

Physical condition:

It is important to keep the equipment in good operating and visual conditions to maintain its value as high as possible and to guarantee the equipment. Comply with service deadlines and document any maintenance or repair work in a register so you can show a buyer that you have served it well.

Be ethical when it comes to reporting wear and tear or failure to avoid an annoying customer in after sales, a list of maintenance providers can help your client know who you can have good service with. Only use the equipment as planned and in proper operating conditions. If you are known to overcome the limits, your machines will be considered negatively in a resale opportunity.

Demand of certain equipment or brands:

If there is a demand for particular equipment, the resale value will be higher. Check the current rates in different areas and consider selling in another region to obtain the highest value for your exchange or sale.

When you are looking to replace your equipment, inform your supplier: they can help you sell it.

6. Try with new technologies or use acquaintances?

If you are in conflict between time-tested machinery and innovative and emerging solutions when choosing equipment, you are not alone.

In this case, your decision will be personal, based on factors such as:

  • Perceived advantages of the new technology over the previous one.
  • Risk and degree of comfort using new technologies (for your business, any superior and operators).
  • Training and adoption time is required for its operators to learn new equipment.
  • Provider support for new technology: is it proven? Can you afford some setbacks? Is it new for them too?
  • Some legislated changes, such as the emission requirements of the engine. Your decision could be to beat the change by buying a remaining piece of old technology while you can still get it, or get ahead with new equipment and learn before anyone else to get ahead.
  • If you are not ready to try a completely new computer but still want to take advantage of advances in technology, there are options available. Many traditional machines can now incorporate innovative optional components. For example, some machines have added the automation option, such as GPS control, so you can change from analog to digital precision. Some of them can be added later, but only if they are considered in advance, so ask us about the add-ons at the beginning of the process.
  • Be sure to work with the right provider
  • Handshake when choosing who to supply your equipment, you will want to work with a provider that simplifies and understands the process for you; it is a good indication of how they will treat it in the future when it comes to support and service. . .

Consider things like:

Years in the business: discover when the company was established. This will give you peace of mind knowing that the supplier has longevity, stability and experience, and that you have had the time to develop strong relationships with the manufacturers.

Manufacturers:

You want to work with someone who is associated with the right manufacturers. Evaluate the machines that each company distributes, both the range of what they offer and the strength of the individual suppliers.

Services:

When you buy your road maintenance equipment, you want to know that you can maintain it without problems throughout its life cycle. Choose a distributor with inventories of local or easily available parts and the service experience you need to keep your machine at peak performance.

Experience in the industry:

You will want to confirm that the company has experience working with clients in your industry and your type of work, and that you will be able to understand and meet their needs. References are a way to assess the credibility and experience of a company.

I hope these tips can be useful in making seditions to choose the best machinery and industrial equipment for your company.



2 Comments

  • I liked that you explained the importance of doing research to make sure that you’re renting the right equipment for a certain project. I would imagine that without the right equipment, you won’t be able to complete your project correctly. I would be sure to research the different types of equipment and learn their purposes and usage information before renting it.

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