Spotlight on: Compressors

Plant Engineering asked: What are the key considerations as plant managers contemplate buying vs. renting compressors? What are some of the advantages and/or disadvantages of buying vs. renting? As with all operations, most plant managers base the decision of buy or rent on sound business decisions, such as interest rates, depreciation period, duration of need, business stability, production fo...

01/01/2007


Plant Engineering asked: What are the key considerations as plant managers contemplate buying vs. renting compressors? What are some of the advantages and/or disadvantages of buying vs. renting?

As with all operations, most plant managers base the decision of buy or rent on sound business decisions, such as interest rates, depreciation period, duration of need, business stability, production forecast, etc.

Rental advantages:

  • Many operations have peak periods of operation with extreme air usage. These peak periods may not be planned or of a duration to justify the capital expenditure.

  • Manufacturing operations that have a low cost of curtailment typically do not have redundancy in the compressed air system. Because of this, renting is a viable solution as the business can withstand the loss of production for the period to obtain the rental and resume production.

  • A new production line is being installed requiring additional air. Renting for a short term will allow the current air system to be audited, which will allow for a proper plan in purchasing a supplemental compressor and/or accessories.

    • Buying advantages:

      • Air usage is continual within a targeted range, which allows for proper selection and system design

      • Bundling of compressor purchase with other capital expenditures could result in a lower interest rate

      • When the risk is low. If a compressor is targeted for replacement in a proven well-designed system, a purchase is typically chosen on the basis of not having to alter system design, compressor rating etc.

        • Nitin G. Shanbhag
          Manager, Air Technology Group
          Hitachi America, Ltd., Industrial Systems Division



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