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🚜 Equipment Rent vs Buy Calculator

Analyze whether to rent or purchase equipment based on utilization, costs, and financial factors.

The Basic Decision​

If (Total Cost of Ownership < Total Rental Cost) → Buy
If (Total Rental Cost < Total Cost of Ownership) → Rent

But the real analysis is more nuanced...

Quick Rule of Thumb​

The 60-70% Rule​

If you'll use the equipment more than 60-70% of the time, buying often makes sense.

Break-Even Utilization = Annual Ownership Cost ÷ (Daily Rental × 365)

The 2-Year Rule​

If total rental costs over 2 years exceed purchase price, consider buying.

Full Cost Analysis​

Ownership Costs (Annual)​

Cost CategoryCalculationExample
DepreciationPurchase Price ÷ Useful Life$100,000 ÷ 7 yrs = $14,286
InterestLoan Amount × Interest Rate$80,000 × 6% = $4,800
Insurance1-3% of value$100,000 × 2% = $2,000
StorageMonthly cost × 12$200 × 12 = $2,400
Maintenance5-10% of value$100,000 × 7% = $7,000
RepairsHistorical or 3-5%$100,000 × 4% = $4,000
Licensing/RegistrationActual cost$500
Property TaxIf applicable$1,000
TOTAL ANNUAL COST$35,986

Daily Ownership Cost​

Daily Cost = Annual Ownership Cost ÷ Working Days
$35,986 ÷ 250 days = $144/day

Rental Cost Analysis​

Rental Rates​

Rental PeriodTypical RateEffective Daily
Daily$X$X
Weekly$X × 3-4$X × 3-4 ÷ 7
Monthly$X × 10-14$X × 10-14 ÷ 30

Example: Skid Steer

  • Daily: $350
  • Weekly: $1,100 ($157/day)
  • Monthly: $2,800 ($93/day)

True Rental Costs​

Don't forget to add:

Hidden CostTypical
Delivery/pickup$100-500 each way
Damage waiver10-15% of rental
Fuel (if not returned full)Premium markup
Environmental fees$25-50
After-hours return$50-100

Break-Even Analysis​

Formula​

Break-Even Days = Annual Ownership Cost ÷ Daily Rental Savings

Where: Daily Rental Savings = Daily Rental Rate - Daily Ownership Cost

Example Calculation​

Skid Steer Loader

FactorValue
Purchase Price$50,000
Annual Ownership Cost$12,000
Daily Ownership Cost$48/day (250 days)
Monthly Rental Rate$2,000
Daily Rental Cost (monthly rate)$67/day
Break-Even Days = $12,000 ÷ ($67 - $48) = 632 days

Interpretation: Need to use equipment 632 days to break even... but there are only 250 working days per year, so this equipment breaks even in about 2.5 years of full-time use.

Decision Matrix​

When to RENT​

SituationWhy Rent
Short-term need< 60% annual utilization
Specialty equipmentRarely needed
Uncertain futureBusiness volatility
Cash constraintsPreserve capital
Technology changes fastAvoid obsolescence
No storage spaceFacility limitations
One-time projectWon't need again
Seasonal workOnly busy part of year

When to BUY​

SituationWhy Buy
High utilization> 70% annual use
Core equipmentUse every project
Long-term needConsistent demand
Strong cash positionCan afford it
Tax benefits neededDepreciation/Section 179
Equipment holds valueGood resale market
Availability issuesRentals hard to get
Modifications neededCustomization required

Tax Considerations​

Buying Tax Benefits​

Tax AdvantageBenefit
Section 179 DeductionDeduct full cost in year 1 (up to limits)
Bonus DepreciationAdditional first-year deduction
MACRS DepreciationSpread deduction over useful life
Interest DeductionFinance charges deductible

Rental Tax Treatment​

TreatmentNotes
Full Deduction100% of rental expense deductible
No Depreciation TrackingSimpler accounting
Matches RevenueExpense recognized when used
CPA Insight

Section 179 and bonus depreciation can make buying significantly more attractive in high-profit years. Consult your CPA about timing equipment purchases with tax planning.

Financing Options Comparison​

Cash Purchase​

ProsCons
No interest costsLarge cash outlay
Full ownership immediatelyOpportunity cost of capital
No monthly paymentsCash tied up in asset

Bank Loan/Finance​

ProsCons
Preserve cashInterest expense
Build equityMonthly payments required
Interest deductibleRequires creditworthiness

Lease (Capital)​

ProsCons
Lower payments than loanStill on balance sheet
Often includes maintenanceLess flexibility
Buy-out optionLong-term commitment

Lease (Operating/Rental)​

ProsCons
Off balance sheetNo equity built
Flexible termsHigher long-term cost
Includes maintenanceAlways paying

Utilization Tracking​

Track actual utilization to inform future decisions:

Monthly Tracking Template​

MonthDays AvailableDays UsedUtilization %
Jan211571%
Feb201890%
Mar232087%
Apr211257%
May2222100%
Jun211990%
YTD12810683%

Utilization Benchmarks​

UtilizationRecommendation
< 40%Rent when needed
40-60%Analyze carefully
60-80%Consider buying
> 80%Buying likely better

Sample Analysis Worksheet​

Equipment: Mini Excavator​

Option 1: Purchase

ItemAmount
Purchase Price$85,000
Down Payment (20%)$17,000
Financed Amount$68,000
Interest Rate6%
Term5 years
Monthly Payment$1,315
Annual Payments$15,780
Annual Insurance$1,500
Annual Maintenance$2,500
Annual Storage$1,200
Total Annual Cost$20,980
Estimated Resale (Year 5)$30,000
Net 5-Year Cost$74,900

Option 2: Rent

ItemAmount
Monthly Rental$3,500
Expected Use8 months/year
Annual Rental$28,000
Delivery/Pickup (8×)$2,400
Damage Waiver$2,800
Total Annual Cost$33,200
Total 5-Year Cost$166,000

Decision: At 8 months/year utilization, BUYING saves $91,100 over 5 years.

Decision Checklist​

Before deciding, answer these questions:

Utilization Questions​

  • How many days/year will we use this?
  • Is demand consistent or seasonal?
  • Do we have backup if it breaks down?

Financial Questions​

  • Can we afford the down payment?
  • What's our cost of capital?
  • What tax benefits apply?
  • What's the resale value?

Operational Questions​

  • Do we have space to store it?
  • Who will maintain it?
  • Is rental availability reliable?
  • Do we need modifications?

Strategic Questions​

  • Is this core to our business?
  • What's our growth outlook?
  • Are we expanding into this work type?
  • What's the technology obsolescence risk?

Common Mistakes​

MistakeReality
Ignoring opportunity costCash has value beyond the purchase
Forgetting hidden ownership costsInsurance, storage, maintenance add up
Not tracking utilizationCan't make informed decisions without data
Emotional attachment"We've always owned our equipment" isn't analysis
Ignoring tax timingSection 179 in wrong year wastes benefit
Assuming rental = wasted moneySometimes renting IS the right answer