New, Used, Rental
Better Roads Staff
As business has improved, including dealers and rental companies placing large orders to finally replenish their fleets, wait times have been extended for certain new products. This has had a positive effect on the used equipment market, says Tisdale. Equipment coming out of rental fleets and onto the used market is older than in the past, “so there are a bigger variety of price points now that the customer can choose from in the used market,” he says. “There’s not as many of the late-model, low-hour, near-new machines, but there’s a lot more of those middle-age-range machines.”
Machines, says Pank, just primed to go to work.
A sour economy has underlined – and put a few exclamation points behind – the rental option
By Marcia Gruver Doyle
There’s an interesting split going on in rental these days.
“Almost every national rental company has seen double digit growth, and that’s not with double digit growth in the end markets,” says Matthew Flannery, executive vice president, operations and sales, United Rentals. “I don’t see it slowing down in the near term.”
Working with the American Rental Association, IHS Global Insight projects total North American construction and industrial equipment rental revenue to reach an annual growth rate of 18.9 percent in 2015. That equates to more than $29 billion in revenue in 2015, well above the 2007 peak of $25.4 billion.
And yet in this revitalized rental market many contractors are still struggling to find work. What gives?
Perfect rental market?
The deep depths this industry has gone through has created the right conditions for the rental market.
“Contractors are becoming totally aware of rental and using it at a much higher degree than in previous economic cycles,” says
Christine Wehrman, CEO of the American Rental Association.
Recent growth by national chains bears this out. As of press time, United Rentals just bought Blue Mountain Equipment Rental, its fourth buy in 2011. Volvo Rents, converting from a purely franchise model to a mix of both franchises and company-owned stores (see story on page 43), made more than 50 acquisitions since its reorganization announcement last year. And RSC now has 51 express locations, start ups that allow it quick entry into an area, and the ability to take time to make a brick-and-mortar decision.
And, Wehrman says, independent companies continue to remain “as strong as ever. They are also replenishing their fleets. And regardless of the size of the rental company, it’s still a relationship business.”
“This is the greatest period for rental sampling than has probably ever existed because more people are challenged with buying,” says Frank Roth, RSC’s vice president of marketing and innovation. “It’s a chance for us to showcase how competitive rental can be against ownership.”
The core reasons to rent haven’t changed much, but the economy has underlined and put a few exclamation points behind them:
Freeing capital. With access to capital a challenge, how you use it becomes even more critical. Renting instead of buying frees up your capital for other needs, and in some cases may be the only alternative if financing is denied. “Rental helps you manage your capital risks,” says Chris Gustafson, rental and used equipment division manager, Caterpillar.
Flexibility. The type and number of rental machines can be easily adjusted and different jobs require different solutions. NES points out that a contractor may need a 40-foot lift for one job, a 60-foot lift for another, and an 80-foot lift for still another. You don’t have to use an inefficient machine just because you have it on hand. And rental companies are constantly evaluating their fleet mix. For example, backhoes may have been hot a few years ago, but instead of just replacing backhoe for backhoe, rental firms can opt to buy another machine instead. “It’s as much about getting the right fleet as it is about replacing the old fleet,” Flannery says. As an example, United Rentals has targeted its earthmoving segment to grow from 14 percent to 20 percent of its total fleet mix.
Being able to concentrate on what you do best – build. Servicing equipment may not be your core competency and you may find keeping skilled mechanics on hand troublesome. Another thing to consider: will you be able to update their training, especially in light of Tier 4 engine maintenance complexities? Rental firms say they can handle these issues. For example, aerial-lift rental provider NES has a two-hour service call window: Call at 10 a.m. and a service tech will be there by noon to assess if it can be fixed on site. If a machine has to go back to the shop, another unit is called in.
New areas, same service. National rental companies argue their processes make it easier for contractors to go after jobs outside their normal geographical areas – accounts and service are in place and renting eliminates the transportation costs you would incur hauling your equipment to a new locale.
You don’t have to decide right now.
Rental purchase options, a popular alternative especially for heavier machines, give you the flexibility to delay the purchase decision. Opt to buy 90 days later and a portion of your rental will be applied to the purchase agreement. Opt out, and it becomes a straight rental.
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