All businesses, large or small, need tools and equipment to get the job done. But for small businesses – where cash-flow is often tight and a big up-front investment can be off-putting – the big question is: ’should I buy or hire?’.
If you're unsure whether to invest in equipment or go for a low-commitment leasing arrangement, there are some key questions to ask yourself and important things to consider.
What to ask yourself when you're deciding whether to buy or hire tools:
How often will you use the tool?
Most businesses will have an inventory of owned ‘essentials’. For example, a self-employed handyman will likely own a range of power tools that are used regularly for a variety of jobs, but they won’t necessarily own specialist equipment like a tiller or spray painter. A good measure of whether a tool is essential or specialist is how often your business uses it.
Some tools are too expensive to buy outright and too pricey to maintain if they’re only going to be used on an infrequent basis. Although specialist tools may still be expensive to hire, the occasional or one-off cost can bring you quicker, improved results on specific projects – and you can factor that cost into your quote for the job.
What is the tool's life span?
Some tools and pieces of equipment are upgraded fairly often as technology and industry standards develop. So if your business relies on the latest technology, it makes sense to hire regularly-updated tools rather than purchase them, in order to avoid repeat spend as equipment becomes obsolete.
It’s also important to consider how long you plan to keep the tool for. If it's for a temporary project, or during a trial period for a new service, it’s usually more cost-effective to hire equipment rather than buy.
Hidden costs of purchasing tools and equipment
Although buying your own tools might seem like the simplest and cheapest option, there could be hidden costs associated with buying tools that you’ll need to consider.
Here are some of the most common costs associated with purchasing your own tools and equipment.
- Delivery
- Insurance
- Replacement
- Repairs
- Storage
With that being said, if you decide to hire your tools, you’ll need to be clever with your timings and make sure you can use the tools or equipment for more than one job at a time. This means you won’t have the additional cost of having to hire anything multiple times which can increase rental costs over time to become more than the initial purchase price.
Getting good value for money
When you’re trying to decide whether to hire or buy, it’s important to calculate the value for money you’ll get from both options by considering your minimum requirements. If your budget doesn’t stretch far enough to buy the spec and features you need, renting might be the best option as you can get what you need for a more affordable price.
Buying cheaper or second-hand isn’t always the answer either. Cheaper items can quickly depreciate in value and don’t come with the same guarantees and warranties that come from buying something new.
What are the benefits of hiring and purchasing?
Although the rental fee for specialist tools can look high at first glance, it's worth taking a closer look to see if the price includes benefits like repairs, maintenance and storage, as these could offset the spend in the long-run. Hiring a specific tool also gives you a useful opportunity to 'try before you buy' – so you can see how well it works and what applications it has before making a big purchase.
Hiring
|
Pros |
Cons |
|
Immediate availability |
Could be costly if you need the equipment on multiple separate occasions |
|
Good for short-term needs |
May not be able to rent specialist equipment easily or cheaply |
|
No storage required |
|
|
Delivery, repairs and maintenance are often included in rental price |
|
|
Opportunity to try before you buy |
|
Purchasing
|
Pros |
Cons |
|
Costs minimised if using the equipment all the time |
Capital investment required |
|
Good for long-term needs |
Costly to buy and replace the most up-to-date equipment |
|
More chance of finding specialist equipment |
Storage required |
|
|
Need to pay for insurance, repairs and maintenance |
|
|
Equipment depreciation makes it difficult to sell on when you no longer need it |
Whether you decide to hire or buy, losing your tools means losing your livelihood so you can't be too careful. With police confirming incidents of tool theft in the UK are rising, it’s more important than ever to take the right precautions. Check out AXA’s article Tradesmen: how to keep your tools safe here.
If you do purchase your tools and equipment, the proper policy can make sure that they are protected. Find out what’s covered in our public liability insurance section.
