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April 30, 2015

Why it’s better to rent than buy Tier 4 equipment

  • Contractors should expect higher maintenance costs for the clean diesel engines due to special fluids, filters and servicing.
    • By STEVE MICHAELS
    Neff Rental

    mug
    Michaels

    The Environmental Protection Agency was created to protect human health and the environment. So, it is no wonder that as part of its clean air initiative the EPA created Tier 4 engine requirements that reduce harmful exhaust gases for diesel-powered equipment.

    Not only are Tier 4 engines more friendly to the environment, but they are more fuel efficient and powerful.

    If you are a contractor, you’ve likely heard of equipment with Tier 4 engines because as of 2011 they are required for all new construction equipment. Because of this, over the past few years there have been vast improvements to the way diesel engines are built for construction equipment.

    However, this can affect your overall cost of owning and operating this equipment. And while there are fuel cost savings for Tier 4 over Tier 3, you still need to determine if it makes sense to buy or rent new equipment because implementing the final Tier 4 engines normally comes at a great cost.

    You should consider a few things prior to making the decision to rent or buy equipment.

    First, make sure that the project calls for Tier 4 because while it is required for all new equipment, you may be able to use older equipment on a jobsite. Additionally, be sure to familiarize staff with how to operate the unit correctly so projects stay on schedule.

    You’ll need to consider training for your staff as well.

    Oftentimes when you purchase or rent, training packages are available to ensure that every mechanic and operator is properly educated on how to maintain this new technology.

    As rental and purchasing decisions arise during the course of the year, closely consider the project’s guidelines and budget.

    When deciding if you should buy the equipment, many contractors consider the resale value of pre-Tier 4 equipment. This has been a common question and challenge due to the fact that resale equipment frequently is shipped outside the United States, where EPA regulations are not enforced.

    What happens to the equipment with Tier 4i engines? Major manufacturers are working on kits to restore these engines back to Tier 3 so they can be shipped overseas without dramatically affecting resale value and cost. All newly produced units inside the U.S. are required by the EPA to be Tier 4, which then adds greater cost to engines that have to be reprogrammed back to Tier 4i and below.

    Many Tier 4 engines with at least 75 horsepower use 1 to 4 percent less fuel compared to Tier 4i engines in certain applications.

    Regardless of how you look at it, contractors will see an increase in the cost of Tier 4 equipment, which has been the case during the last few years with the evolution of the products. The 10 percent to 25 percent increase comes from the engine design, build and installation, as well as government requirements.

    Keep in mind the cost of an engine in a small air compressor may be 50 percent of the total unit cost compared to an engine for a wheel loader, which may account for less than 20 percent of the overall cost.

    Companies also should expect higher maintenance costs, as special fluids, filters and servicing is required. But also keep in mind that meeting the new EPA regulations allows contractors to better compete for sustainable projects.

    Because of these extra costs, oftentimes it makes more sense to rent than buy. This allows contractors to minimize their cash outlay and capital requirement because they only pay for the time needed to complete the project. As such, any additional costs are only fractional because usage is minimized when renting compared to purchasing.

    By renting more equipment, contractors may better direct their dollars to do what they do best: managing and completing projects.

    Rental companies can deliver the latest high-tech equipment to the site with the assurance that the job is 100 percent compliant.

    Steve Michaels is vice president of fleet operations at Neff Rental.





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