A recent Purchasing.com survey revealed that although purchasing continues to be the top financial option for construction owners (with 59% of respondents choosing it), decision-makers are increasingly renting construction equipment, and they’re doing so far more than they did in the past. Overall, rentals jumped by 75% in the survey year from 2013 – 2014.
According to the American Rental Association’s Equipment Rental Revenue Forecast, growth exceeding 7% per year will continue through at least 2018.
What is driving rental as a more popular choice? I believe it’s cash flow and shifting the risk of ownership to usership. If we’ve learned anything over the last decade, it’s that uncertainty is certain. Heavy equipment rental, with its comparably low up-front expenses, works to keep more cash on hand and provide a hedge against economic volatility. So for many of us, it just makes good business sense.
How do you know if the rental option is a good fit for you? It depends on your business. More specifically, the decision to rent or own involves many variables that are unique to your business such as financials, equipment utilization patterns, in-house maintenance resources and the amount of work in the pipeline. As you weigh your decisions to own or rent consider these rental benefits:
- Improved cash flow.
Rather than tying up cash with a large up-front outlay and financing charges, renting can recover 100% of the cost with revenue generated by the project at hand. Rental expenses are also immediately deductible and there are no related costs for warranties, insurance, transport or storage, freeing up even more cash and usually Rental expenses are fully Tax deductible as a business expense.
- Lower business risk.
Obviously, renting does not involve a long-term financial commitment. You simply return the equipment when the project is complete and the payments end. This eliminates the risk of expensive new machinery standing idle in between projects, depreciating in value and slowly becoming obsolete. Renting also improves uptime, because replacements are typically available immediately should a rental machine go down on the job. Many rental companies also offer RPO’s (Rental Purchase Options) the ability to buy the rental units at any given time should you feel the need to enhance your own fleet, this option also allow you to apply a high percentage of the rental fee towards the acquisition price.
- Greater flexibility.
Most heavy equipment rental companies stock a wider selection than any single construction company can own. This increases your flexibility to bid on projects that equipment limitations would otherwise rule out. You can bid with confidence, knowing you’ll have the right tools on hand if you get the job but carrying no risk if it goes to someone else. It also allows for project flexibility, on occasion you could find that in order to get the job done in a timely, efficient manner you may need to ramp up capabilities further with additional equipment.
- Access to new equipment technologies.
Today more than ever, Technology is playing a key role on the decision making process regardless of buying or renting. As technology increases productivity, accuracy and reduces cost, renting technology enabled equipment is a cost-effective way to avoid equipment obsolescence and to add more efficient and emissions-compliant machines to your fleet immediately. The latest equipment is not only a powerful bidding differentiator, but it can enhance worker productivity and fuel-efficiency, increasing per-hour profitability on the worksite.
- More time to focus on your work.
Renting reduces the load and cost of machinery service, repair, and insurance from your daily tasks, giving your team more time to focus on doing exceptional construction work. Maintaining quality is key for an industry in which word-of-mouth means everything and competition is as tight as ever.