When it comes to running a business, capital expenses can be quite intimidating. For many businesses, vehicles are one of the biggest potential expenses, and figuring out what is worth buying, and what you should rent, is not easy. Here’s a quick look at the pros and cons of renting versus buying your transport equipment.
If you buy transport equipment, you own it outright. It’s one up-front expense, or a deposit and then loan payments, if you take out a loan on the equipment, but once that loan is paid off you own the equipment and you don’t need to pay anything else out beyond maintenance and insurance. You should find that if you keep the equipment in good condition, it will be cheaper in the long term to buy, than to rent. You can do what you like with the equipment, including modifying / upgrading it, and you don’t need to answer to anyone.
If you buy used, then thanks to the speed with which transport equipment depreciates, you can get some quite affordable equipment that will last you for many years.
Renting may save you money up-front, and it will give you a little bit of flexibility in that you can pick some equipment, rent it for a while, then hand it back. Many companies do this if they like to always have relatively new equipment, since this means that at the end of each lease they can ‘replace’ the equipment when they start a new lease.
With rental agreements, there are often options for people to take out a maintenance contract. If you’re not wanting to have the burden of in-house mechanics and engineers, then this can be an attractive option. There’s less up-front outlay for renting, and you can have someone else taking care of the vehicles. For a startup without much capital, or a company with a small but growing business, this is an appealing way of doing things.
As you grow, you might find that the cost difference between hiring a truck and buying starts to become less appealing, and at that stage, buying a few second hand vehicles could be a good starting point to extending the fleet, but rental is a versatile option that is used by many companies.
Which is Best For Your Business?
Not all small businesses or even medium sized ones can access sufficient credit to buy. For many, renting makes more sense just as a way to build a credit rating and to get started in the industry. Renting means that you aren’t tied down with capital that isn’t exactly liquid – you can scale up and down as your business requires, and you have the flexibility to rent more equipment when seasonal demand requires it, and use less when you don’t need the whole thing.
It makes sense to build a business plan and consider both options, thinking ahead a couple of years and making sure you don’t tie yourself in to anything that is overly complex.