Excavator Rental vs. Purchase: Which Is the Best Option for Your Business?

The construction industry is in a growth stage, and construction equipment is the most crucial component in this sector. These types of equipment are used to do heavy-duty work like digging, lifting, moving materials from one place to another, etc. Among these heavy machines, the excavator is much more popular and more demanding for its multifunctional use. Excavators are essential in both the mining and construction industries. Excavators are heavy machinery, and the acquisition of one involves high investments. Large firms that have been in this industry for a long time can afford to purchase new excavators if the need arises, but for small and medium-scale firms, it is very difficult to invest so much compared to the scope and scale of work. To cater to this problem, the alternative of purchasing, i.e., a rental system, arises. The decision will have significant impacts on finance, project efficiency, and long-term success.

There is a continuous debate between rental and purchase. No single option is suitable for all types of businesses. There are various factors that should be looked upon when deciding the acquisition option. In this blog, we will look deeply into all factors that determine the choice of rental or purchase.

What is Excavator Rental?

Excavator rental means renting an excavator for a certain period. It does not involve full ownership of the machine. The rental of an excavator can range between ₹25 lakhs to ₹1 crore depending on the model and size of the excavator. On the other hand, renting an excavator can range between ₹1000 and ₹25000 per day. Renting an excavator involves many considerations to make. It could be the budget, cash flow of the firm, or the scope of work. There are advantages and disadvantages of renting an excavator. Let us know about it in detail.

Advantages of Excavator Rentals

Renting an excavator involves many advantages.

• The most important benefit of renting equipment is that no upfront costs are required. This is very useful for small-scale and medium-scale businesses that cannot afford to pay so much upfront cost.
• A single project may require multiple machine requirements. So, renting a machine according to need instead of purchasing is a good solution.
• The rental company in most cases looks after the maintenance. So, it reduces repair costs, downtime, and breakdown.
• Renting reduces the risk of depreciation and need not have to worry about the equipment losing value over time.

Disadvantages of Excavator Rentals

Renting an excavator also involves certain disadvantages.

• If the excavator’s requirement is long-term, then renting can be more expensive.
• As the ownership is with the rental company the business cannot modify or customize the excavator.
• Another disadvantage is the availability of the desired excavator when and where it is required. For example, if the requirement is in a city where no dealer offers a rented excavator then there is a problem.

What is Excavator Purchase?

Purchasing an excavator means buying the excavator by paying full upfront or through finance. It means getting the ownership of the excavator. A mini to mid-size excavator can cost between ₹25 lakhs – ₹ 70lakhs while large excavator and extra-large excavator can cost more than ₹1 crore. Normally big firms who have long-term projects going on usually purchase equipment. It reduces the overall cost of the machine. Purchasing an excavator also involves certain advantages and disadvantages.

Advantages of purchasing excavator

Purchasing an excavator involves certain advantages.

• Purchasing involves no repeat payments like renting once an upfront amount is taken without any rental fees.
• The businesses that require an excavator for a long time, purchasing an excavator is cost-effective.
• Businesses can modify or customize the excavator according to the requirements. Often an excavator comes with various attachments and customization. Owning allows you to customize the excavator.

Disadvantages of purchasing excavator

• In case of purchasing an excavator, a huge initial cost is required with no deferred payment. Most of the businesses are unable to bear this investment.
• The responsibility of maintenance and repairs falls on the businesses.
• The machine experiences depreciation which lowers the resale price.

Comparing the Financial Implications of Renting vs. Buying

Renting and Purchasing both have their implications. Financial implication is the key factor to keep in mind while choosing to hire or purchase. In case of purchasing, there is a huge upfront cost required while in the case of renting deferred payment is required according to the usage period. In the case of businesses that require the excavator for a long period and have working capital, it is suitable to purchase the machine. But when businesses are small and do not require the excavator for a long term then renting is an ideal choice. In the case of renting a machine, the businesses save huge working capital whereas in the case of purchasing a machine need of huge upfront cost arises.

In the case of renting a machine the repair and maintenance cost is generally on the renting company whereas, in case of purchasing, the business needs to take care of it. Maintenance and repair are essential for this type of machine as it incurs huge cost, downtime, and breakdown.

Another important factor is identifying the period of usage. Analysis of the length of the project and frequency of use is vital when choosing to purchase or rent. If it is high then purchasing the machine is an ideal choice whereas if it is low then going for rental is suitable.

Elements that should guide your decision?

Project Duration and Frequency of Use

When the excavator will be used for a single project and for a short tenure then renting is ideal. But when the project is for the long term and the excavator will be used for multiple purposes then purchasing the machine should be opted. Long-term renting would eventually surpass the purchasing cost.

Budget availability

When the business has a huge working capital then purchasing is ideal but when the business lacks working capital and is unable to afford huge upfront costs then renting is suitable.

Business Growth

When a business has future plans for expansion, then it will require the excavator for future purposes too. In this case purchasing the machine should be ideal. It will save a lot of capital and will be useful in the long term. But when there is no requirement for the future and the excavator will be used for a very short term then renting is ideal. It will not be ideal to invest so much for such a short period.

Conclusion

Desi Machines has a team of experts who can identify the perfect requirement for your business by analyzing the scope of work, budget availability, and financial status. One can not only get the best deals from Desi Machines but also get expert advice regarding buying or renting options. Nowadays there are schemes available like Hybrid Rental which involves the concept of renting with an option to buy later. This is useful for businesses who are unsure about buying at an initial stage. Moreover, a business can test the machine before use and buy it later. Desi Machine offers solutions to all your construction equipment problems.