The construction sector contributes to the nation's GDP and gross capital formation, and also creates investment opportunities across related industries. Construction industry is transforming and has become overworked compared to earlier days. With the upsurge in construction work, there is an increasing demand for innovative equipment/solutions in the construction equipment sector that can cater to various applications on field. 

Construction equipment is one among those factors whose impact primarily rests on other aspects on construction sites. Construction machinery covers from heavy equipment, portable to mobile lighter equipment such as backhoe loader, compact excavator, crane, bulldozer, roller-compactor, paver, and many more. While major companies prefer to own  machinery, many others choose either to rent or lease it.  

Generally, for a contractor, equipment is the second biggest (first is the labor costs) outlay of capital. Depending on how you avail and use it, machinery can enhance productivity or instead, be proven as a cash drain. If you are working on a long-term construction project, you need to keep a close eye on your bottom line. Many a time, when making a decision for multi purpose construction equipment, especially backhoe loader machine, renting makes more sense than tying up cash in purchasing it. But the same cannot be considered in all the situations as buying, renting, or leasing has its own advantages and disadvantages. 

1. Buying 

Everybody cannot afford to own a backhoe loader. You can purchase it, (1)  if you have the required capital. (2) The machine is crucial to your core business and you aim to use it often & for a long time. Some of the pros of buying this machine are: 

• If you own it, you can access it at any time.

• Equipment operators can master the backhoe loader machine and learn its little quirks.

• You can deduct liabilities such as repairs, depreciation, taxes, insurance, and interest from your taxes. In addition, the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 offers extra depreciation for the first year of ownership.

• You can have control of when and how the machine will be used, sell it, or trade it in. It will also offer high resale-value.

• Owning backhoe loader can build equity in your company.

Pros don’t come with cons. Disadvantages of owning a backhoe loader include:

• You need to transport, maintain, store and repair the equipment and are also responsible for disposing of it at the end of its working life.

• Purchasing turns liquid assets into fixed assets. 

• If the machine witnesses a lot of hard use, the trade-in value will shrink. 

• If you are writing off a lot of depreciation, you may have to pay Alternative Minimum Tax penalties. 

• If there is a retraction, you will get stuck with the machine.

2. Leasing 

Leasing is a good alternative to purchasing. Although it’s like a loan, at the end of the lease, you can get it exchanged with a new model. In addition to this,

• No cash is required up front as you need not make any down payment.

• You need not worry about its transportation, storage & maintenance.

• Leasing doesn’t impact borrowing power and also you can acquire more capital power. 

• Leasing gives you an opportunity to stay up-to-date on technological advancements, comply with new rules & regulations, and reduce the risk of obsolescence.

• Sales taxes are rolled into the monthly payment, but by leasing the backhoe loader, you can deduct those monthly payments as operating expenses.

While the cons are: 

• Backhoe loader has an increasing demand. As a result, it may be unavailable when you need it the most.

• Long term leases are expensive to break. They have penalties for early returns.

• You will be held responsible for insurance or damage fees.

• Leasing costs can add up over time and you may end up paying twice the initial amount.

3. Renting 

Renting would be a better option if your business economy is uncertain or you have peak times where you require to fill in your machine fleet without taking on debt. Renting a backhoe loader doesn’t have much downside.

• Rental contract period is extremely flexible and does not demand long term commitment as well as penalties. Hence you can return back the machine at any moment. This is helpful especially if the construction industry is slowing down.

• Rental companies have access to new & latest backhoe loader model. If you are not sure of how the machine would actually help your work, then renting would be a great way to test-drive it. 

• By renting, you can easily get the backhoe loader replaced in case if break down.

When compared to that of leasing and buying, renting has fewer cons.

•  Long term rentals can be expensive in comparison with leasing.

• The machine may not be available at short notice period.    

The best bet of buying, renting and leasing the backhoe loader depends on the pace at which the construction industry is progressing, the work nature or the time span of the construction project.