This question causes much debate and many contractors agonize over whether it is better to buy or to rent. Some contractors are fundamentally against renting equipment arguing that rent is ‘dead money’, whereas if purchased the equipment not only solves an operational need, but also adds a valuable asset to the company. Other contractors take the view that the rental option offers a more flexible, less risky option than purchasing, which they contend, ties up large amounts of capital and strains cash flow.
In truth, there is merit in both sides of this debate, and while sometimes purchase is the best option, in other circumstances it can be more advantageous to rent. There is no absolute correct answer and so the contractor must weigh up the requirements and general circumstances in each case to decide.
Buying the equipment usually makes sense if there is a continuous requirement that lasts a substantial period of time. Most industry commentators would suggest that if the equipment is required for 9 months or longer, then it is more economical to purchase than rent, however, this should not be only consideration. Formwork and Scaffolding involve major capital expenditure and the high up front cost can have a negative effect on working capital which in turn can be catastrophic. Even then, assuming the contractors finances are sufficiently robust, before deciding to purchase the contractor must also consider the hidden cost and the resources needed to maintain the equipment. Storage and maintenance yard, transportation, maintenance staff all add to ongoing running costs which quickly eat into the apparent savings made by choosing to purchase.
formworkOn the other hand, by purchasing suitable good quality equipment the company gains an asset and a resource. The equipment gives the contractor the capability of actually doing the work and when the long term savings are factored, it should help the contractor to be both more profitable in carrying out work and more competitive in tendering. With a large investment there is always a risk to the contractors that market conditions would turn sour however, there is always a demand for good quality used equipment globally and the contractor can easily sell his equipment by advertising it on The Formwork Store!