Question 1 of 20
How would you decide whether to buy or rent a major piece of construction equipment when the purchase has a fixed upfront cost and lower monthly carrying cost than the rental?
Strong Interview Answer
Compare the relevant ownership and rental cash costs over the expected use period. With the stated facts, the monthly savings from ownership are $6,800 − $1,400 = $5,400, so the $86,000 purchase cost is recovered in about 15.9 months. Purchasing becomes cheaper at roughly 16 months of use. If resale, financing, taxes, downtime, or maintenance assumptions change, include them only when the decision model calls for them.
What to Listen For
- incremental monthly cost
- break-even = fixed cost ÷ monthly savings
- about 16 months
- use only stated assumptions
Caution
Do not introduce depreciation, financing, or resale value when the scenario expressly says to ignore them.