How to Set Profitable Rates
There’s no magic formula, but there are things you can do to ensure your fleet is making money
There is really no "rule" for setting profitable rental rates, because unless the bulk of the rental fleet is profitable, the business will not be. The rental business is an asset management business first, with income considerations second. Get a proper dollar utilization for the overall fleet and your concerns should be minimal.
In today’s market with 8 percent money paid off over 60 months, you need a 25-percent dollar utilization to just cover the debt service. After direct operating expenses, the company should reflect at least a 40-percent gross profit using depreciation methods that produce a 40-percent residual at the end of the 60-month period. If your results are much different from this you might want to benchmark your operation against some others to see what you can do to fix the problem.
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