Renting vs Leasing Heavy Machinery – What’s the Difference?

Procuring new and used heavy equipment and machinery has been challenging for the last two to three years. Supply chain issues, materials and chip shortages and aging equipment have all led to unique challenges for companies looking to replace equipment or add new machinery to their fleets.

In a recent blog post, we explored the ongoing supply chain disruptions and the chaos these disruptions have caused throughout the heavy equipment industry. Few construction or mining companies have been immune to this challenging equipment market – and the challenges aren’t likely to end any time soon.

Fortunately, there are more ways to get access to new and used equipment outside of purchasing a new or used machine. Rental and lease options are becoming increasingly attractive in today’s market. Let’s explore these two options, including the differences between the two and what factors to consider when deciding which is best for your operations.

Leasing heavy equipment and machinery

Many heavy equipment and machinery vendors offer lease options. These longer-term agreements usually start at 24-month durations, with the length depending on your specific agreement. A lease basically grants you “ownership” of the equipment for the length of the agreement, with the expectation that the equipment is returned after the lease expires.

Your lease may include some terms regarding the use of the equipment, such as a set number of hours or specific use locations or environments. This helps the vendor protect the value of the equipment after the end of the lease.

The biggest advantage of a lease versus a rental is the length of the agreement. Often, lease terms are longer, giving you more flexibility on use. The length of the lease often makes it a more cost-efficient option as the machine is cheaper to use on a per day basis when compared to a rental. Another big advantage of a lease is the ability to add a buy-out clause to the agreement – this allows you to purchase the machinery at the end of the lease at a pre-agreed upon rate. This allows you to use the equipment while deciding if it should be permanently added to your fleet.

Leases do have some disadvantages that should be considered. There is a signed commitment to full term – meaning greater commitment to use and price. You are responsible for fulfilling all payments on the lease, even if you don’t use the equipment as expected. Leases can also include strict hour limits on usage, with penalties for going over the allowed hours. As the hour limit nears, you may be faced with the difficult decision to let the equipment sit or pay out-of-pocket for the additional hours the equipment is used.

Renting heavy equipment and machinery

Rental agreements are another option often offered by heavy equipment and machinery vendors. Rental agreements are often shorter than leases, usually lasting six months or less. After the end of the agreement, the equipment or machinery is returned to the vendor.

Heavy equipment rental agreements offer a number of benefits, including their fast turnaround. Many vendors may offer same-day rentals with simple contracts. This means you can have the equipment working in the field much faster than with a lease deal. You may also be able to secure more flexible terms with a rental compared to a lease. Most vendors offer flexible rental terms, ranging from as little as 24 hours up to six months. Rentals also often include full damage coverage, which limits the risk to your company.

Much like when discussing lease deals, there are some disadvantages to heavy equipment rental agreements. Often, rental agreements are more expensive on a per day basis. You may not enjoy the same flexibility if rental term needs to be extended as many vendors schedule their rental equipment well in advance. This makes a rental a risky option for those big, long-term jobs where the equipment plays a critical role.

Important factors to consider

Deciding between a lease or rental isn’t always easy as they both offer pros and cons and are each great alternatives to being without a critical piece of equipment in this chaotic market. There are some factors to consider when weighing your options.

First, consider the length of your needs. If you need a machine for a big job, a lease may be better. If you expect to use the equipment for smaller jobs, or more sporadically, rental agreements may be better.

Cost is another important factor. Rentals will likely cost you more per day but come with a reduced commitment. Leases are more affordable per day, but may include some other costs, including expenses for early return of the equipment or for hours used in excess of the lease’s limit.

Maintenance is another factor to consider. In a short-term rental, you may not be required to perform preventive or routine maintenance. During a lease, you will likely be required to perform maintenance on the equipment as though you owned it.

Insurance should also be considered. When leasing, you will likely be responsible for insuring the equipment against damage or theft. When renting, you may not have to carry this coverage on your own. However, the cost of this coverage may be included in the rental expense.

Talk to the experts at RMS for help

At RMS, we know it isn’t always easy to decide between a lease or rental. We offer flexible rental and lease terms and are committed to helping you find the best solution to fit your needs.

We are a full-service rental provider covering everything to maintenance and service. Contact us today to discuss your equipment needs with one of our experts.

A message from Vice President of Sales and Marketing Andy Schwandt: 

The pandemic has brought with it new challenges and supply chain issues across a variety of industries. Construction equipment is no exception. Click the video below to learn what you can do to mitigate these issues.