Heavy Equipment purchase?

Question

Has anyone ever bought a piece of heavy equipment like an excavator or a Bobcat as a means to save money because you kept having to rent them for projects?

Any thoughts on if this might be a smart decision or if I should just rent equipment and write-off the costs?

For reference I’ve spent about $7000 last year renting and looking to have another cost of about $7000 to rent the same excavator for 2 more projects.

I’ve always done really well buying smaller things like saws and hand held equipment as opposed to renting.

Mike H. · Answer

I don't think 14k a year is enough to justify buying one of these machines.  But it also depends on what kind of machine you're buying.  We bought a 120k excavator as a builder.  But it pays for itself and then some.  If we do 10 to 12 builds this year, we're saving about 10k to 15k on lot clearing, another 3k or 4k on the footers and piers, and now we're doing our own septics which we use it to dig a hole for the septic and to do the drain line trenches.  We're pretty much saving about 20k to 25k per build.   We're paying for the thing in full in savings in 5 or 6 builds.  Add in the fact we had to get the trailer for it too and maybe another build. But at 14k a year, I'm not quite sure if thats worth it. If its a 40k machine, then maybe you're saving the rental money in three years which isn't bad.  And if you can rent it out here and there even better. But you do have to store it and move it. If you're only using it three or four times a year, I think the headache and risk of it might make it easier to just rent.  But the previous poster was correct.  These things hold their value amazingly well.If I had to guess, if you bought it for 40k and only used 9 or 10 times, the hours on the machine would be so low you could probably resell it for 35k or better (given that their retail value would go up over three years so the discount from say 48k to 40k might even mean you break even)..

Matthew Paul · Answer

Nothing better than having your own equipment .  I have a mini ex , skid steer  , and kubota tractor  plus a dump trailer  But , I am also a contractor .   Maintenance isnt a problem , thats easy . You will need a minimum of a 3/4 ton truck to pull them , I would get a dump trailer dual axel  12,000 lb capable of moving the equipment , also used for hauling . you will need DOT numbers on the truck since you are over 10,000 lbs combined gross vehicle weight , and a DOT physical for the driver . An inland marine insurance policy for the equipment .

Currently you rent equipment when you NEED it , when you have equipment you will use it more often since you have it .  But your friends and family will be asking for favors .

If you want a machine thats a jack of all trades , look at a Kubota L 3901 with a backhoe .

( Kubota still has 0% financing  )

Jonathan Bock · Answer

@Alecia Loveless

Who's operating the heavy equipment ?

I always love the questions about saving money by buying equipment especially as year end approaches.  It's always a mixed bag.

I could definitely appreciate your purchase if you are running a more active and construction based real estate business but I have some qualms about liability and would want to know more about your business structure.

Austin Cheatham · Answer

Great question! I’ve seen this come up often, especially as rental costs add up. From an accounting and financial perspective, the decision to buy or rent heavy equipment like an excavator depends on a few factors.

First, consider how often you'll use it. You've already spent $7,000 on rentals last year, with another $7,000 coming up. If you foresee needing the equipment regularly, buying might make sense. Calculate how many rentals would equal the purchase price.

Next, think about your personal tax situation. Would depreciation on the equipment lower your taxable income, or do you already have tax losses to offset? Depreciation can be beneficial, but it depends on your specific situation.

Then there’s cash flow. For example, if the equipment costs $50,000 and only saves you $5,000 in rental fees annually, is it worth tying up that capital? Financing could be an option. Putting $5,000 down might allow you to take the full depreciation deduction, while only paying a fraction of the cost upfront, which helps balance cash flow and tax savings.

Of course, owning equipment also comes with costs like maintenance and insurance. So if your use is sporadic, renting may still be the better option.

Several different factors play a role in this situation. I'd definitely consult with an accountant on the situation to see if it makes sense. Feel free to reach out if you'd like to discuss further!

Basit Siddiqi · Answer

As others have suggested, it should make sense economically before you worry yourself about the tax benefits.There is a piece of mind of renting sometiems. You don't have to worry about the storage costs. You don't have to worry about damage to the equipment or it being stolen.But if you do decide to buy the equipment, there is a good chance that it will be eligible for bonus depreciation and potentially 179 expense depending on your net income.

Kory Reynolds · Answer

Sure it can be a write off, but my question is if it is the highest and best use of your time (or the given employees time) to be running a skid steer - transporting it, storage, maintenance, cleaning, etc, and if it still makes sense if you need to hire someone to run it for you and take care of the other things.

Add up all those recurring costs - maintaining the machine, maintaining the trailer, having a large enough truck to tow it, insurance and registration for all of the above, your time or your employees time related to all of the above...even at $14k a year it might be attractive enough to keep paying that and having them drop it off at the job site for you.

A brand new machine could easily cost you over 6 figures - that's 7 years of rentals at $14k/year before including all the holding costs.  If it is going to open up other opportunities for you, all the better, perhaps it is worth it.

I recently had a client buy a septic pumping truck given they were spending a significant sum on the service for their RV parks - certainly are scenarios out there that it makes good business sense.

Ashish Acharya · Answer

@Alecia Loveless Buying heavy equipment like an excavator could be a smart decision if you're spending $7,000 annually on rentals. Purchasing allows you to save on future rental costs and depreciate the asset or use Section 179 for a full deduction.

However, factor in maintenance, storage, and long-term use. If you only need it occasionally, continuing to rent and write off the costs might be more cost-effective.

*This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Chris Preone · Answer

Couple of my thoughts

Also have to consider how are you going to move the machine? Do you need a bigger truck and a trailer, extra insurance storage..

can you rent your machine out when your not using it? Extra income

if you live in a Snowy climate can you use it for snow removal?  Extra income

a new mini excavator is $50k plus pretty easily can rent alot of machines for that much.

Alecia Loveless · Answer

Thanks Jasper! I hadn’t thought about consulting with my accountant. But now I will!

Jasper K Juhl · Answer

Hey @Alecia Loveless

I've actually been down this road myself and it really depends on how often you're using the equipment and how comfortable you are with maintenance. It sounds like you've already invested a lot in rentals, about $14,000 when you factor in your upcoming projects. Buying a piece of heavy equipment like an excavator or Bobcat can definitely save you money long-term if you're going to continue to use it frequently. Based on my own experience, when I found myself spending thousands on rentals for construction projects, I eventually bought a Bobcat and it paid off within two years. The key is maintenance and storage. If you don’t have a plan for both, ownership can quickly turn into a headache.

Also, don’t forget about resale value—equipment like this holds its value quite well. Even if you only use it for a couple of years, you could sell it off and recoup a good portion of your investment.

Now, on the tax side, renting gives you an immediate write-off, which might be easier for cash flow. But buying allows for depreciation over several years. You’d want to consult with a CPA to see which option aligns better with your tax strategy, especially given your other business expenses.

PS: Fun fact—Bobcat is a brand name, but it’s often used to describe any compact excavator. That’s how much they’ve dominated the market!

I’d recommend checking the resale values on used Bobcats and comparing that to the total you'd spend on rentals. You might be surprised.

Hope this helps!

Best,Jasper Juhl