How do you decide when to rent and when to buy?

[bdog]

Renting something you use all the time is a huge waste of money but buying something you don't use often is probably a bigger waste.

How do you guys go about deciding?

I own tons of equipment but some things may get used a few times a year. I have a $40,000 dump truck for example. When first bought it was used daily for months but it has been used maybe four times this year. Heck No more than I use it I could hire a dump truck for $75/hr and it would be cheaper than what I pay in registration and insurance. Thinking about selling it and just hiring it out when I need one. I own a trencher. Probably worth 4K. I have dug two trenches this year. I can rent one for around $150 a day I think. If I sold it I could rent one 26 times for what I have tied up in it. I don't think I have dug 26 trenches in my life.

Things like my tractor and skid steer I will always own as they get used a lot but other things I am thinking of thinning out. If it doesn't get used at least five times a year it is probably cheaper to rent.

 

[Jim Shooz]

The old saying "if it floats, flys, or fxxks its cheaper to rent"

 

[conkli48]

Renting something you use all the time is a huge waste of money but buying something you don't use often is probably a bigger waste.

How do you guys go about deciding?

I own tons of equipment but some things may get used a few times a year. I have a $40,000 dump truck for example. When first bought it was used daily for months but it has been used maybe four times this year. Heck No more than I use it I could hire a dump truck for $75/hr and it would be cheaper than what I pay in registration and insurance. Thinking about selling it and just hiring it out when I need one. I own a trencher. Probably worth 4K. I have dug two trenches this year. I can rent one for around $150 a day I think. If I sold it I could rent one 26 times for what I have tied up in it. I don't think I have dug 26 trenches in my life.

Things like my tractor and skid steer I will always own as they get used a lot but other things I am thinking of thinning out. If it doesn't get used at least five times a year it is probably cheaper to rent.

Sounds like your thinking too small, you could rent out your trencher and dump truck and make some money off of them. Probably a decent side gig, just post an ad on craigslist. Its free, and if you rent it out a few times a year id be worth it.

 

[newbury]

Renting something you use all the time is a huge waste of money but buying something you don't use often is probably a bigger waste.

How do you guys go about deciding?

I own tons of equipment but some things may get used a few times a year. I have a $40,000 dump truck for example. When first bought it was used daily for months but it has been used maybe four times this year. Heck No more than I use it I could hire a dump truck for $75/hr and it would be cheaper than what I pay in registration and insurance. Thinking about selling it and just hiring it out when I need one. I own a trencher. Probably worth 4K. I have dug two trenches this year. I can rent one for around $150 a day I think. If I sold it I could rent one 26 times for what I have tied up in it. I don't think I have dug 26 trenches in my life.

Things like my tractor and skid steer I will always own as they get used a lot but other things I am thinking of thinning out. If it doesn't get used at least five times a year it is probably cheaper to rent.

I go through that conundrum almost everytime I think I need a piece of equipment for a particular task.
I estimate:
1. the entire cost of rental - For example for me to rent almost any heavy equipment in my Mississippi location the locations are a 1 hour drive, thus 2 hours to pick it up, 2 hours to drop it off, total of about 200 road miles w/ my trailer thus probably $100 worth of fuel, tires etc. and 4 hours of my time. It's about half the same time and cost in my Virginia location.
2. The relative availability of said item when I need it, when every one needs a generator I might not get one.
3. Usage - do I need it for 1 day? Can I use it in any weather?
4. What's the cost of buying? (include maintenance etc. down the line)


Thus when I needed a 6" wood chipper in Virginia for lot clearing - Entire cost of rental for a week would have been about $1,000. So I bought a Jinma for about $1,700. Used it for about 24 hours TOTAL over the course of several months, got the lot cleared. But I was not under any pressure to chip in bad weather, just when it was nice. Now I've moved it down to Mississippi and used it maybe another 10 hours.

When I needed a dethatcher for my lawn I rented one for $70.

When I needed a rototiller for the lot in Va I bought a lightly used 5' KK for $800 versus renting for $300 for a week.

I would really like a mini-ex and just had a 400' trench dug for a waterline in Mississippi. Entire job took the 2 man crew about 4 hours and cost me about $500.
Rental would have cost more. I probably could have done it in two or three days with a mini-ex.

Bdog in your case I bet you know it's past time to part with the truck and trencher.

Sounds like your thinking too small, you could rent out your trencher and dump truck and make some money off of them. Probably a decent side gig, just post an ad on craigslist. Its free, and if you rent it out a few times a year id be worth it.

Or you might get your equipment broke.

 

[N2DFire]

No more than I use it I could hire a dump truck for $75/hr and it would be cheaper than what I pay in registration and insurance. Thinking about selling it and just hiring it out when I need one. I own a trencher. Probably worth 4K. I have dug two trenches this year. I can rent one for around $150 a day I think. If I sold it I could rent one 26 times for what I have tied up in it.

I pretty much use logic like that. Cost to Purchase & maintain vs cost to rent multiplied by how often I really would use it.

Which is why I haven't bought a backhoe or Mini-Ex yet. If & when I REALLY need one I can pay my buddy who owns an excavating business to do it faster / better than me cheaper than I can buy the equipment. Of course there is always the "fun factor" of time spent playing (er working) with said equipment too.

In those two specific examples you gave, I think I would sell, rent when needed, and use the $ for other more justifiable toys (er equipment).

Sounds like your thinking too small, you could rent out your trencher and dump truck and make some money off of them. Probably a decent side gig, just post an ad on craigslist. Its free, and if you rent it out a few times a year id be worth it.

Your regular homeowners & auto insurance will not cover you or your property if it's being rented to someone else. Also if he's going to operate it himself instead, there is liability insurance to consider.

The premiums for the proper coverage are most likely not worth the extra income. Of course he could always do it "on the sly" without said insurance but all it takes is one bad thing to happen. Then best case he's out a trencher or dump truck; worst case he's out of house & home and possibly in jail.

 

[bdog]

Good points guys. As to renting out my stuff I am not doing that unless I am running it because I don't want it tore up and frankly I don't have time to go do things for others and it doesn't pay enough. We did some work for hire with the backhoe, skid steer, and dump truck and for me it was more hassle than it was worth. I can't find enough time to get my own projects done much less those for others.

There have been times where I was doing everything I could think of to make extra money but right now I have more money than time. I have been working 80+ hours a week and my main job pays way more than I could get doing odd jobs with my equipment for others.

I don't need the money from selling my equipment but just having the stuff sitting around requires time to maintain it, etc.

 

[jenkinsph]

bdog,
I would sell the dump truck and trencher and look for a deal on a good used dump trailer if you have the need for one. This would likely take care of the small jobs and needs then hire dump trucks in the future for large jobs.

The dump trailer being much lower to the ground are useful for lots of other tasks including hand loading. When I sold my dump truck back in 1985 I have not owned one since, thankfully.

Whether I buy or rent does involve frequency of use but also whether it is even available to rent. Some things I have to buy because small towns don't have them available anywhere. For many years I had a bad habit of buying too many tools. Now approaching retirement I am being more careful, hard to eat a concrete saw when you are hungry and hard to sell on short notice without giving it away. I have been asked why I don't buy hay equipment as there is lots of oppurtunities to bale in my locale. That is hard and risky work that I don't want to participate in anymore.

So I recommend you only buy what you need frequently and don't mind operating. Hire the rest out to others.

 

[rustyshakelford]

Good points guys. As to renting out my stuff I am not doing that unless I am running it because I don't want it tore up and frankly I don't have time to go do things for others and it doesn't pay enough. We did some work for hire with the backhoe, skid steer, and dump truck and for me it was more hassle than it was worth. I can't find enough time to get my own projects done much less those for others.

There have been times where I was doing everything I could think of to make extra money but right now I have more money than time. I have been working 80+ hours a week and my main job pays way more than I could get doing odd jobs with my equipment for others.

I don't need the money from selling my equipment but just having the stuff sitting around requires time to maintain it, etc.

That's a tough spot. When stuff is paid for it doesn't cost much to sit. When you need it, it's there. Do you have any big pintle tag trailers? Dump could be a backup truck to move equipment when the big truck is down. On the flip side, sitting is hard on things and the upkeep starts to add up. Wish you lived closer and I'd invite you into our co-op of equipment sharing. Makes things real easy when you have the same mentality of folks and get rid of those that don't

Brett

 

[bspeedy]

I tend to buy more likely than rent. It's nice if you have multiple jobs for a piece of equipment. I justify my mini-ex purchase because I use it for trenching, land clearing, harvesting firewood using the thumb, and I plan to buy a mower for it to mow ditches and banks.

If you buy something at a low point in it's depreciation curve, it's easier to justify as it is not costing you much in depreciation.

 

[smstonypoint]

Surely you have days when you wonder "Should I buy a piece of equipment or rent it"? Then you come to the same old realization. "I need the advice of an economist -- an economist would be able to answer my question."

The simplest way to address the problem is to calculate the "break even hours" -- the number of hours of operation at which the cost of renting equals the cost of ownership.

I will assume that the rental rate, R, is hourly and that FC[SUB]R[/SUB] represents any cost of renting that is not based on hours of use (e.g., transporting the rental equipment to and from your property) during a year. Let FC[SUB]O[/SUB] represent the annual cost of owning the equipment (depreciation, opportunity cost of investment, insurance, etc.) and AVC[SUB]O[/SUB] represent the cost of operating the equipment for one hour (e.g., fuel, allowance for maintenance and repairs, etc.).

Letting H* equal the break even annual hours of usage -- RxH* + FC[SUB]R[/SUB] = AVCxH* + FC[SUB]O[/SUB]. Solving for H* gives ( FC[SUB]O[/SUB] - FC[SUB]R[/SUB])/(R - AVC).

If your planned usage is less than H* it is less costly to rent. If your planned usage is greater than H* it is less costly to own.

You can modify R to allow for fuel usage fro a rental tractor, skid steer, etc.

The analysis doesn't take into account the convenience of having owned equipment on hand.

Steve