FCC

Rent or lease – what’s the best option

2022-10-07

Earthmoving equipment is essential in construction industry. Construction companies or contractors always need them for their projects. So far in India, they have adopted three practices, either they buy earthmoving equipment or they lease or they rent equipment. Renting and buying are prevalent practices while leasing has failed to pick up as a viable option.

As construction industry is currently under pressure to be cost effective, therefore it is also under pressure to cut down capital expenditure and reduce the buying of equipment. So, the infrastructure sector has to select one option – either renting or leasing. But it is not easy. To make things possible, all the primary stakeholders – rental industry, OEMs, construction companies and financers should not only find a balance but also maintain a proper supply chain.

An ideal model would be – that OEMs should sell equipment to equipment rental companies with the support of financers. Rental companies should provide equipment to construction companies either on lease or rent. This would also maintain the crucial balance of demand and supply of equipment.

This will also help equipment rental industry to strengthen and enhance its capacity, which is crucial otherwise the above model will not work.

Still it is necessary to examine and compare equipment leasing vis-a-vis equipment financing.