Deciding Whether to Buy or Rent Equipment
A landscaping crew needs a trencher for a 6-week project. Renting costs $340 per week with a 4-week minimum, and the crew would also pay $95 per week in delivery and fuel for every week rented. Buying a used trencher costs $9,200. If bought, maintenance runs $60 per week of use, and the machine can be resold afterward for 55% of the purchase price if used 6 weeks. The crew estimates it will need a trencher on 5 future projects of 4 weeks each over the next 3 years if it buys. Assume no resale until the end of the 3 years and ignore interest.
1. For the single 6-week project only, compare the total cost of renting versus buying-and-reselling.
Read the worked answer
Rent: 6 weeks × ($340 + $95) = 6 × $435 = $2,610. Buy: $9,200 + 6 × $60 maintenance = $9,560; resale = 0.55 × 9,200 = $5,060; net = 9,560 − 5,060 = $4,500. For one project, renting is cheaper by $1,890.
2. Now include the 5 future projects (4 weeks each). Which option is cheaper over 3 years, and by how much?
Read the worked answer
Total use if buying = 6 + 5×4 = 26 weeks. Buy: $9,200 + 26×$60 = $9,200 + $1,560 = $10,760; resale $5,060; net = $5,700. Rent all: 6 weeks at $435 = $2,610, plus 5 projects × 4 weeks × $435 = 20 × $435 = $8,700; total rent = $11,310. Buying is cheaper by $5,610 over 3 years.
3. At what number of total weeks of future use does buying break even against renting (with resale)?
Read the worked answer
Let W = total weeks used. Buy net = 9,200 + 60W − 5,060 = 4,140 + 60W. Rent = 435W. Set equal: 4,140 + 60W = 435W → 4,140 = 375W → W = 11.04 weeks. So buying beats renting once total use exceeds about 11 weeks. The planned 26 weeks is well past breakeven, confirming the buy decision - but if the future projects fell through and only the 6-week job remained, renting wins.