New versus used equipment rental equipment: what the real cost guide shows

What to take away

New versus used equipment rental equipment costs hinge on purchase price, downtime and resale value. The cheaper machine is not always the cheaper year.

This article gives general equipment-rental information. It does not give individualized advice. Confirm current duties with manufacturers, responsible authorities, and qualified professionals.

What new iron actually costs

A new 5,000 lb telehandler lists near CAD 95,000 to 130,000 in Canada, about USD 70,000 to 95,000 in the United States. A 2016 unit with 4,000 hours trades near CAD 45,000 to 65,000, about USD 33,000 to 48,000, before inspection and repairs. Those are illustrative figures, not quotes; your dealer sets the real number.

The gap is roughly the price of a second machine.

New machines arrive with warranty coverage, predictable service intervals and the manufacturer's parts pipeline behind them. JLG, Genie, Caterpillar, Bobcat and JCB all build 5,000 lb class telehandlers, and dealer price varies by spec, attachment package and region. Depreciation starts the day the machine lands.

Typical resale curves put a new telehandler at 55 to 65 percent of its purchase price after three years, so a USD 85,000 machine gives back roughly USD 47,000 to 55,000.

Used machines arrive with someone else's hours on them. Public listings on MachineryTrader and Ritchie Bros. are where many yards compare asking prices. A 4,000-hour telehandler may need a hydraulic pump, a set of tires and a boom wear-pad service inside the first year.

Typical bills for that work run CAD 3,000 to 8,000, about USD 2,200 to 5,800, with 5 to 12 days in the shop. Budget inspection and repair before the machine earns a dollar.

The total cost formula, worked through

Work in your own variables. Let P be purchase price, R the annual repair and maintenance spend, D the downtime days per year, M the contribution margin per rental day, and S the resale value when you sell.

Annual cost of ownership is P minus S, divided by the years you keep it, plus R, plus D times M. The last term is the one owners forget. A machine down for six days in July at a 400 dollar daily margin has cost 2,400 dollars before the mechanic arrives.

Here is the same formula with numbers. Buy a 2016 unit at CAD 45,000, about USD 33,000, keep it three years and sell at CAD 28,000. P minus S is CAD 17,000, or CAD 5,667 a year. Repairs run CAD 5,000 a year. The machine loses 12 rental days at a CAD 400 margin, or CAD 4,800.

Annual cost: CAD 15,467.

Now the new machine. CAD 110,000 new, about USD 80,000, reselling at CAD 70,000 after three years. P minus S is CAD 40,000, or CAD 13,333 a year. Repairs run CAD 1,500 and downtime is 4 days, or CAD 1,600. Annual cost: CAD 16,433.

Used iron wins on P. New iron usually wins on R, D and S. Which total is smaller depends on how hard the machine works.

Push used downtime to 20 days and repairs to CAD 7,000 and the used machine costs CAD 20,667 a year. Now the new machine is cheaper.

A machine that runs 200 days a year punishes downtime. A machine that runs 40 days a year punishes capital. Match the purchase to the utilization, not to the sticker.

Hidden ownership costs

Insurance premiums track replacement value, so insuring a new fleet costs more than insuring the same fleet used. Software subscriptions for telematics and rental management run per unit, so a larger fleet pays more each month.

Delivery routing and fuel surcharges scale with how far the machine travels to the job. A used machine that spends more days in the shop still burns fuel on the truck when it moves.

Cash flow cycles matter more than any single line. Rental revenue arrives monthly; a major repair lands as one invoice. Yards that buy used to save capital often meet that invoice in the middle of construction season.

Ways to equip the business, compared

What to check before you sign

Inspect any used unit against the manufacturer's service schedule, and price the parts it will need. Get the inspection done by a qualified mechanic, not by the seller.

For machines that ride on a truck, the Federal Motor Carrier Safety Administration: Cargo Securement Rules set the interstate performance duties, including provisions for roll-on, roll-off and hook-lift containers. Whether they apply to a given vehicle and operation must be checked.

For the yard itself, Occupational Safety and Health Administration: Safety Management describes a proactive program that finds and fixes hazards before an injury or an inspection exposes them. Occupational Safety and Health Administration: Powered Industrial Trucks covers forklift hazards, operator competence, inspections and pedestrian risk, all of which shape what a used unit needs before it goes out.

Before you commit capital, write the purchase into your rental business plan with the utilization you expect and the margin you need. Then walk the yard with the equipment checklist for new owners and price what each machine still needs.

Common questions

Is used equipment always cheaper?

No. Used wins on purchase price, usually the largest single number. New wins on warranty, repair frequency, downtime and resale.

How many hours on a used machine is too many?

There is no universal number. Compare the hours against the manufacturer's service schedule, price the next major service, and check how the machine was used. A high-hour unit with full records often beats a low-hour unit with none.

Does leasing beat buying?

Leasing preserves cash and spreads the cost, and it usually costs more over the full term. It suits a yard that needs working capital for fleet and marketing at the same time. Confirm the tax treatment with your accountant.

When should a yard rent instead of buy?

When the machine is needed for a handful of jobs a year. Every rental day reopens the buy-or-rent question, but so does a machine sitting idle with payments attached.