Heavy industrial machinery can cost hundreds of thousands of dollars to purchase, without factoring in maintenance fees, repairs and fuel costs and yet only 35 to 40 percent of the people who use equipment rent vs. own. Rental equipment is offered at a fraction of the price of buying, and all the additional fees that keep the machines safe and efficient are covered by the rental company. Given this information, why do the remaining 60 percent of users make large capital investments on machinery that becomes a depreciated asset?
The Rental Trend
The rental industry has greatly expanded in the last decade, creating new options for contractors who traditionally purchase their equipment and haul it to each new location.
Renting serves a practical need for customers using common pieces of equipment on short term projects. Rental houses allow contractors the ability to get equipment on short notice without the inconvenience and cost of having to transport the equipment from the storage facility to the jobsite. It's one less thing they have to think about.
Still, old habits are hard to break and for many companies, the trend has been to purchase large equipment simply because that is what has been done in the past.
During the current economic environment, most companies are looking for ways to cut back and minimize their expenses. Fewer companies are willing to spend the amount of needed money to expand the fleet or purchase new equipment, especially when older, less reliable machines are still part of the overhead. As emissions standards become stricter and fuel costs rise, renting equipment seems like a viable option for those dealing with financially insecure situations, especially when companies are not interested in making a large investment in a machine that has the potential to sit idle for months.
Benefits of Renting
"Renting is a great option for those who may need a specific piece of equipment for one phase of a project but don't foresee getting that much use out of the equipment in the long run," says Erik Olsson, president and CEO of RSC Equipment Rental. "Even in cases where they think they may use it frequently, it's worth comparing the cost of renting versus owning the equipment. I think most contractors would be surprised at how much they can save. The decision to own versus rent should be analyzed over the useful life of an asset and the percent of time that asset will be utilized is a critical component."
The real estate forecast aside, there are several reasons why renting can make more sense than buying. When renting, you receive equipment that has been tested and provides the optimal level of performance. In addition, maintenance checks and repairs are routinely performed before, during and after renting equipment so the customer receives assurance of a well-maintained machine and avoids the hassle and expense of having to service the equipment. Furthermore, because industrial equipment is such a large investment, many companies are forced to hold on to an asset that becomes devalued very quickly, and they must continue to pay for the storage and maintenance of a piece of equipment that is infrequently used. In contrast, rental fleets, have an average life-span of five years, making them younger, less prone to problems and more environmentally sound, letting out fewer emissions than older diesel engines.
Companies have taken the rental equipment industry beyond just machinery, adding benefits that are beyond cost. Mobile tool rooms are portable trailers custom-stocked with the specialized tools and small equipment used for a short-term project. On-site maintenance prevents costly down time and increases productivity. Software programs, allow the customer to manage fleet, costs, time and rental spend more efficiently-all issues that are of particular importance on long-term projects with large jobsites.
The Rent vs. Own Debate Goes On
The most important thing to remember is that there are options. Buying allows companies the convenience of already owning the equipment. Renting allows companies to control their expenses and conserve capital while still getting quality equipment that is well maintained and safe-an option that in the current economic situation may be the better decision.
Construction Business Owner, October 2009
