Renting

Renting is a method of acquiring the equipment for a shorter duration. It is an alternative to direct ownership (i.e. through buying) of the equipment for a shorter period. Acquisition of equipment through renting is suitable when the contractor or the construction company requires the equipment for a project task of shorter duration. In addition through renting, the company can select the equipment that is exactly suited for the project task and it is possible to acquire the equipment based on latest technology which is more productive than older models. In these circumstances, renting of the equipment is more beneficial than direct ownership even though the rental charges are higher than the direct ownership charges. Since the equipment is not owned by the user, there is no tax benefit associated with depreciation of the equipment. However tax benefit is gained as the rental cost is considered as an expense that reduces the income of the company using the equipment. The capital that is tied up when the equipment is acquired through buying can be used in other investment if the equipment is rented. Among the three methods of acquiring the equipment, typically the hourly rental cost is higher as compared to that of lease or direct ownership. Rental period may a day, a week or a month and may go up to one year. The rental rates are generally established on daily basis, weekly basis or monthly basis. The daily rate on hourly basis is higher than the weekly rate on hourly basis and the weekly rate (on hourly basis) is higher than the monthly rate (on hourly basis). The repair and maintenance cost of the equipment to be paid either by the user or owner of the equipment (i.e. renting company) is stated in the rental contract. In case of major repair work, generally the cost is paid by the renting company whereas the cost of minor repair and maintenance that is incurred at the project site is usually paid by the user of the equipment. The cost fuel and lubricants is mostly paid by the user of the equipment. By renting, it is possible to reduce the downtime experienced due to breakdown of the equipment followed by repair as the equipment is replaced by the rental service. Further in order to check the suitability of specific equipment in actual job site conditions, the equipment can be rented and its performance can be tested before taking a decision to purchase the equipment that involves a major capital investment. In addition, the user of the equipment can get rid of the cost of transporting the equipment from one project site to another by renting it. However the user mostly pays the transportation charges for bringing the equipment from renting company's yard to the work site and also pays the cost of assembly, loading etc.