Rental is Here to Stay

AED recently completed and mailed its new Rental 2006 report. The association surveyed construction equipment dealers, rental companies, manufacturers and end users. In the end it seems clear that rental has become more popular, and as all parties concerned figure out ways to improve the rental transaction, its popularity will continue to increase.

Probably the biggest increase in rental activity reflected by the report is in the dealer segment. Since 1980, rental activity among dealers increased from 57 to 99 percent. Dealers have offered rent-to-sell for many years, but now also offer rent-to-rent services as well. The rent-to-rent offered by dealers is not as flexible as a rental company program, however, as a large percentage of dealers don't offer daily rentals, probably because of the type of equipment they rent.

Dealers plan to add to their rental fleets. More than 50 percent plan to add brands, expand size offerings and types. There are no plans to decrease rental fleets. Earthmoving equipment makes up most of the dealer fleet. Aerial work platforms and scissor lifts make up a small percentage of their total fleets. General construction equipment, such as compressors, pumps, light towers and generators, are carried by about 25 to 30 percent of the dealers responding. It appears they like to stick with what they sell and fix without any complications.

As far as rental companies are concerned, I was surprised to see that 60 percent of the respondents offer rent-to-sell as well as rent-to-rent. Rental companies appear to be open more days per week, but about the same hours per day as a dealer.

Approximately 75 percent of rental companies plan to increase their offerings in 2006 by adding new brands, sizes and types of equipment offered — a much higher percentage than the dealers. Another surprise was the number of rental companies that carry earthmoving equipment in their fleets. The bigger the rental company the more likely they will carry earthmoving equipment.

The sales mix stats for rental companies indicates that approximately 20 percent of the respondents receive less than 50 percent of their revenues from rental. The differences between dealers and rental companies might be starting to blur.

After reviewing these statistics and the intentions of expanding rental fleets, one has to wonder how this is going to work out. It appears that rental offerings from dealers and rental companies are sure to overlap more than they are now. With competition increasing, management of the rental operation is sure to remain a priority item.

Now that we have established that rental is here to stay and will in fact be expanding if dealers and rental companies have anything to say about it, I guess the outcome of these efforts will be decided by the end users. What do they want?

The Rental 2006 report tells you exactly what they want, and knowing what they want can surely help you map your plans for the next few years. One thing you will be surprised by is the fact that price does not seem to be as big an issue as we think.

All of the material in the survey encourages me because I am a rental "fan." On the other hand, the expansion side of the equation concerns me because I don't know what makes up all these plans to add brands, size and types of equipment. Management better spend the time reviewing these plans to make sure what they are thinking is what their customers need and want.

AED's Rental 2006 report contains much more information including utilization statistics and can be purchased by AED members for $395 and $695 for non-members. Their website, www.aednet.org, contains ordering information.

Garry Bartecki is director of dealer/distributor services at BDO Seidman LLP of Chicago, as well as consultant to Associated Equipment Distributors (AED). He has also worked as an independent CPA and consultant to equipment dealers. He can be reached by phone at (312) 616-4677 or email at gbartecki@bdo.com.

Loading