Rent Your Way to Better Cash Flow (And Other Benefits)

This $93 billion industry is growing at 5% per year because of the effects it has on cash flow, risk, flexibility, technology and labor demands. Time to count your costs.

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By Jason Hurdis, Global Market Professional, Construction Materials Industry, Caterpillar Inc.

It’s a $93 billion industry that just keeps getting bigger, with a compound annual growth rate of nearly 5% forecast for the coming years. “It” is the global construction rental market, and if you haven’t considered renting equipment before, now may be the ideal time. Rental presents an attractive alternative to buying new when cash isn’t readily available or you’re hesitant to make a big financial investment. Here’s why.

Improved cash flow

Buying equipment ties up cash, generally in the form of a large down payment and monthly finance charges. With rental, upfront expenses are low in comparison, letting you keep more cash on hand for other needs and providing a hedge against changes in the market. You can recover 100% of your rental costs with the revenue you generate using the equipment for your current projects. Not having to pay for warranties, insurance, transport or storage — all covered by the rental company — frees up even more cash. Another bonus: Rental expenses are immediately tax-deductible.

Less risk

Typically, rental involves a short-term financial commitment (although long-term contracts are available when you need them). When you’re done with your project or no longer have a use for the equipment, you return it, and your rental payments end. With owned equipment, on the other hand, there’s always a chance it will sit idle between projects, depreciating in value and slowly becoming obsolete.

Greater flexibility

Are you unsure when future projects might hit your schedule, how large or small they might be or exactly what equipment they’ll require? When you rent, you don’t have to invest in equipment you may not end up needing, and you can bid for projects with confidence knowing that rental products will be available for use immediately if you win the work. Many rental companies also offer agreements with the option to purchase, giving you even more flexibility as your business needs change.

Technology

Machine technology offerings, ranging from safety technology to grade control to payload systems to telematics, change quickly. Renting machines with the newest technologies allows your teams to see the potential benefits firsthand and experience how technology can improve jobsite efficiency. Once you’ve tested and identified which offerings provide the most value and productivity, you can make the decision to purchase a new machine or technology with more confidence.

More time for work

If you’re trying to get more work done without adding to your headcount, renting can help free up you and your team for more important jobs. You don’t have to worry about maintenance, repairs, insurance and all the other tasks that take time away from completing projects and making money. Rental also gives you a chance to try out the latest equipment technologies without committing to buy, so you can see for yourself if the productivity, fuel efficiency and safety benefits are worth the investment.

None of this is to say that rental is the be-all, end-all solution for every construction contractor. There are plenty of good reasons to consider a traditional equipment purchase or lease. The right decision depends on your financial situation, equipment use, internal resources and projects in the pipeline. But don’t overlook rental as a viable option — there’s a reason it’s approaching a $100 billion industry.

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