When you need any equipment for performing a particular task, more often than not, you, as a business owner, can get confused over what mode of ownership would be more feasible towards your business.
Conventionally, there have only been two categories of acquiring equipment for businesses, i.e., either buying something outright or renting it out for a predefined time period. The final choice, however, should always reflect your firm’s current financial situation and the feasibility of the model of ownership you are about to choose.
Trucks are usually a capital-intensive business requirement, whether you are renting them out or buying them up front, but each one has its advantages and disadvantages.
Buying a truck would generally require you to stack up a massive initial investment, but it will definitely ring cheaper when the cost is spread over the more extended usage control you acquire. Not to forget, you can definitely get some pretty good salvage value for selling your truck when you no longer need it.
On the flip side, renting is less costly when you consider shorter time durations. However, the costs can add up to substantial amounts if you keep borrowing the truck over a more extended period. Remember, the ‘amount’ you are supposed to pay as rent includes all the taxes, insurance and maintenance costs along with premium expenses that renting firms keep as profits.
However, each one of these advantages and disadvantages of renting and buying respectively is subjective to what’s more feasible for your business at the moment.
You will get the best deal only if you can understand your business requirements well and can judge whether one or the other model of usage control is more suitable for your financial needs.
Here are some tested tips to help you make that choice in a much easier and aligned way. We shall cover all the primary considerations before any transaction takes place from your end:
Your business’s financial standing:
As also mentioned previously, renting doesn’t require a high amount of investment up front, but the costs can definitely add up over an extended period of time. In fact, it might surpass the cost of buying a truck.
You can be led into renting by considering it as a low-cost option, but you definitely need to keep into consideration whether your business is capable of bearing the costs every month and how that will reflect on your firm’s long-term profitability trends.
While buying is commonly associated with emptying the bank, other options can lower the brunt of the massive initial investment that is required in the process of ownership.
You can indulge in buying used trucks in good condition from a reputable used vehicle dealer and that could save you a high amount of money in not paying the increased costs of owning newer models of trucks.
Other options available include financing and leasing. These options will provide you with a similar transaction nature to that of renting, but in the end, you will have the possibility of owning the truck for yourself. The good news is that you have the chance of salvaging the cash if you don’t require the truck or you no longer need the older model.
Do you require the truck frequently or is it just for a time-bound project?
Exactly, for how long do you need the truck is the biggest question you need to answer before settling on the mode of acquisition, whether momentary or permanent.
Some businesses only need trucks or other equipment because they have a particular task in hand. Simply put, they would no longer need the equipment or require the services of specialized trucks once the job is completed.
In such a case, renting would make better sense as the time needed for rental costs to add up and exceed the cost of owning would not transpire, resulting in the more financial feasibility of going for this option.
However, even for specialized jobs or tasks, projects could run well into years and in such a case, renting would not remain a suitable choice for your firm’s final bottom line measures. If you are planning on setting up a dedicated, new business division in your company for which you would definitely need the truck on most days, owning one would ring in a high number of benefits.
One of the biggest nightmares you would have to deal with when going for rentals is the company giving out the truck you require for a particular job to someone else, without having any replacement on hand.
This can severely undermine your business’s prospects of completing tasks on hand with efficiency and will put your firm’s reputation at serious risk. If you don’t have the truck you need at a moment’s notice, you are exposing your business to a severe vulnerability when competing for more opportunities to expand your operations.
Owning the truck outright, on the other hand, will provide you with the advantage of taking up any job, anytime with reduced downtime. This will also reflect on your client’s trust level of your firm as they know that you have the capability and the extent to complete the project with utmost ease and at your will by having a high amount of flexibility.
In today’s highly competitive era, most businesses won’t risk their reputation with clients. This is one reason the ownership model has been soaring over the past year with sales of trucks like the Class 8 models exceeding last year’s sales figures – month after month.
Rentals are going well with specialized equipment like excavators, cranes and compact loaders because they are fulfilling shorthand requirements and rental firms stock them up in large quantities because they are lower in costs to acquire.
Trucks are costlier, and most rentals won’t have 10 models of the same vehicle ready at a time. Having the same truck models would undermine their business model and make them restrictive regarding what they offer to businesses.
In the recent years, rental businesses have flourished and have gained momentum by providing a low cost, short-term alternative to business owners when they need it the most. However rental companies have to deal with the obstacles of catering to varying needs of businesses.
This is perhaps the biggest hurdle that undermines the option of renting equipment or truck for businesses.
Most companies have started trying out rentals as an option, but ownership still rules the roost because it always comes out on top when looking at long-term costs or the salvage value angle. Rentals are just the best option for ‘short’ tasks and give businesses flexibility in the time of a rare or a temporary need.
Trucks move America’s 70% freight day in and day out and most trucking companies are hurling through requirements each day, which makes rentals an unstable option whether it’s new or an established business.
Rentals will definitely grow to overcome these obstacles shortly as they add more on financial capabilities to acquire more similar models of the same equipment and make rentals a safer and risk-free model for businesses that require more stability before choosing to rent a truck.
Smaller companies including new owner/operators who have transitioned from being truck drivers and now have their very own fleets can leverage the option of rentals to acquire more business and grow their competitiveness but even they, in the long term, look to buy out trucks for gaining long-term cost advantage.
On the other hand, buying provides owners with the option of going for used vehicles which are way lot cheaper than getting a brand new model, hence providing a better cost alternative within the buying category.
Rentals generally feature latest equipment and trucks because it’s the rental firm that has to pay the maintenance and insurance costs, which normally are not that high in newer models of trucks, but this makes the rentals more expensive for smaller businesses to indulge in.
Used vehicles, if added by rental firms, would provide them with a newer realm to compete with the more popular ownership model. However, until then, the most feasible option for businesses remains buying their trucks outright, with a small window for momentary requirements to be best suited for rental services.
For rental companies to be successful, it is crucial that they provide firms with a right mix and a wider variety of usage models to get their jobs done faster and in a much more efficient manner than was possible through available means.