Tool hire vs. purchase: what makes sense for your business?

Starting up

1 April 2016

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 before making a decision.

How often will you use it?

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 paint sprayer. 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.

What other benefits can I get?

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.

So what’s best for your business? Do you hire or purchase your equipment? Tell us in the comments below. 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.