What's a better option ... buying, leasing or renting equipment? Find out more
The ongoing boom in the construction sector has led to an increase in buying, renting and leasing of heavy, moving and construction equipment.
Al-Futtaim Auto and Machinery Company (Famco) has brands such as Volvo trucks, buses and construction equipment under its wing and is one of the biggest players in the equipment selling market.
"Sales are at an all-time high and we always recommend buying equipment or machinery since it is an asset for the company. The boom in the construction sector in the UAE will last for the next five years, so most projects are in for the long haul.
"In such a scenario, renting equipment over a long period of time can turn out to be an expensive proposition," says Jaweed Iqbal, Sales Manager, Construction Equipment Division, Famco.
Renting heavy, moving and construction equipment is an ideal option for short-term construction projects.
Arup R. Roy, Senior Business Development Manager of Zenath Environmental Engineering Services LLC, says, "Any piece of machinery or equipment requires regular repairs and maintenance. This leads to increased cost as qualified people have to be hired to carry out the repairs. If a piece of equipment is rented by a company, then its maintenance and upkeep is taken care of."
"The decision to buy, rent or lease is dependent on the company, its business model and its need at that particular point of time," he says.
Zenath Environmental Engineering Services offers its clients a lease-to-own option that gives them greater flexibility.
"Usually we offer a lease-to-own option where a piece of equipment can be leased for a period of time and at the end of the lease term the customer can buy the equipment. We also offer an assured buy-back option. After buying a piece of equipment from us, it can be sold back to us," says Roy.
The Caterpillar rental store is a one-stop shop for the construction industry. "We have everything from generators, drilling machines and jack hammers to drills and earth loading machines," says Ashfaque Azad, Area Manager, UAE, Mohamed Abdulrahman Al-Bahar, which represents Caterpillar in the region.
Renting and leasing comes in various forms. "At Caterpillar we have two types of rentals - with or without an operator. We deal in various kinds of construction-related machines, lift trucks or engines that can be rented with or without operators for a specified period of time. The rentals we deal in can also be taken with or without a maintenance contract," says Azad.
Whether a client wants to rent, lease or buy sometimes depends on the number of projects they have in the pipeline.
"It depends on the customer's need. If a customer feels he has a number of projects in the pipeline, buying equipment is a sound solution. The equipment bought will depreciate over a period of time and can subsequently be sold. Clients who are unsure about how long their projects will last should rent equipment," says Azad.
When it comes to moving, heavy and construction equipment the bottom-line is of utmost importance. Buying heavy and moving equipment has to be treated as a long-term investment that only reaps dividends in the long run.
"If a piece of equipment is worth Dh2 million and the company needs to use it for just three months, it's not worth buying. If the project is expected to go on for two years, then it is a wise proposition to buy the machine," says Emad Subhi, Sales Manager, Al Bakhit Construction Equipment LLC, who recommends that if companies decide to lease equipment, they should opt for the lease-to-own option.
Renting and leasing is an extremely popular option in the moving, heavy and construction equipment industry in Europe, where 80 per cent of the equipment is rented or leased.
"But the opposite holds true in the UAE. Here, buying is a more popular option as cash flow is not a problem.
"The renting and leasing market in the UAE is still growing and is not as mature as the African or European markets," says Shakil Merchant, Operations Manager-Sales, Kanoo Machinery.
Renting and leasing does away with the problems associated with expensive repairs or maintenance.
"This way all the problems or breakdowns will be handled by an outside contractor and the company can concentrate on its areas of core competency. In the long run, renting costs are higher, but it's a more practical option. For companies that have short-term projects and a cash flow problem, leasing or renting is the best option," says Merchant.
