Rent vs. Own: Which is Best for Heavy Equipment?

Whether to rent or own heavy equipment is a question utility fleet managers commonly consider, largely because there isn’t a definitive answer other than, “It depends.” They must assess the various factors unique to their circumstances to determine the best path forward.

In a recent conversation with UFP, Paul Jefferson, senior fleet manager at Oklahoma Gas and Electric, offered his experience-based insights to help guide other utility fleets in this important decision-making process.

Why Buy?
What would prompt a utility fleet to purchase heavy equipment instead of renting it? Cost. Yes, purchasing is expensive in the short term, but long-term rental costs will add up to a heftier investment.

Jefferson – who manages 240 fleet assets, ranging from Class 1-8 vehicles to equipment including backhoes, trenchers, dozers, water pumps and air compressors – said he has run the numbers. When it comes to long-term use, he explained, owning heavy equipment always comes out on top. He recommended other fleet managers run their numbers, too.

Here is Jefferson’s equation: Say you own an asset for 10 years. Add up all the costs, subtract fuel and preventive maintenance – which would likely be the same whether the asset was a purchase or a long-term rental – and then divide that number by 10 to get one year’s worth of ownership costs. Next, compare that to a year of rental costs.

“I guarantee every time it will be cheaper to own heavy equipment,” Jefferson said. “Rental and leasing companies don’t put that much capital money out there without making a good return on their business.”

Beyond standard rental fees, Jefferson noted that fleets could incur additional costs if rented equipment is returned late or damaged. “If you own garages, you can control your repairs. But if you turn in [rental] equipment with damage, it’s going to be a lot more expensive than fixing it yourself.”

Reasons to Rent
Renting may be the better choice when heavy equipment is needed only for a short time. It can also be a viable option when fleets do not have time or capital available to purchase an asset.

For instance: “Recently, a fiber-optic company that leases space on our poles decided to do an upgrade project,” Jefferson shared. “So, we had to upgrade some poles in backyards, and we rented power dollies for that. Other examples are renting an air compressor at a site that didn’t have one and renting a concrete hammer for our backhoes. In those cases, a weekly rental made sense.”

He said OG&E has also rented heavy equipment for emergency response purposes. “We’re an electric utility, so if we have a storm, we may need to rent equipment we don’t normally have to respond properly.”

That has included rentals to fill in for fleet assets damaged during natural disasters. According to Jefferson, “A few years ago, a tornado hit the parking lot of our Shawnee, Oklahoma, location and took down some of our assets. We rented equipment until we were able to replace them.”

Overall, renting heavy equipment that is rarely needed throughout the year is a logical, practical choice. “Financially,” Jefferson said, “it doesn’t make sense to give [the business unit] a surplus asset that we have to maintain all year. In that case, we’d just rent the equipment.”

Two other scenarios present ideal circumstances for renting: (1) those times when specialized equipment is temporarily tied up in the shop and (2) when fleets want to try out new equipment.

For example, “We had some operators roll a pressure digger … so we rented one until we finished repairing ours,” Jefferson shared.

Regarding demos, Jefferson is a proponent of renting heavy equipment so operators can gauge its real-world performance before making any purchasing decisions.

“Sometimes equipment looks good on paper or the internet until you use it and realize it doesn’t work as well as another brand,” he said.

Final Answer?
Choosing whether to own or rent heavy equipment is not unlike deciding between making dinner or placing an order for delivery. One option requires more work but typically costs less, while the other offers convenience with a heftier price tag. Nonetheless, whatever the final decision, utility fleet managers will have access to the equipment they need to get the job done.

About the Author: Shelley Mika is the owner of Mika Ink, an Omaha, Nebraska-based branding and marketing communications agency. She has been writing about the fleet industry since 2006.