Grading & Excavation Contractor

Equipment Rental: Is Borrowing Best? – Part 1

Is renting construction equipment the new wave of the future? While pride of ownership counts for a lot, renting can save companies from a financial burden.

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Since 1993, the equipment rental industry has more than doubled in size—from $11.2 billion to $22 billion. Just 10 years before that, equipment rental was a $1.1-billion industry.

Industry experts say that a combination of factors is responsible for this sizable boost, most notably the construction booms of the late 1980s and mid-1990s. According to Fred Snow, president of Brandolini Company in West Chester, PA, the economic boom of the ’90s increased construction projects and, consequently, the demand for equipment. Since equipment is expensive to buy, contractors turn to rentals to meet project needs. “During a boom economy you’ll get a lot of landscapers and other small contractors who decide to get into the development business. That might account for the jump in equipment rentals. Also, bigger companies that own equipment will still rent for other jobs rather than move equipment from site to site.” Snow also points out that there is a lot of equipment from the last boom in the mid- to late ’80s that has aged. “It can be cost-prohibitive to replace this equipment so companies turn to renting as an option.”

According to Mike Whelan, general manager of J.S. Cole Company in Newark, CA, the rule of thumb is that rental costs are 3-4% per month of the total purchase price of the machine. In the San Diego, CA, area, for example, a midsize excavator can be rented at Hawthorne Rent It Service for $475 per day, plus $300 for delivery and pickup (within a 20-mi. radius) and another 10% for insurance (unless the company has a certificate of insurance on file at the rental store). The longer the rental, the cheaper the per-day rate. At this rental store, the weekly rate is four times the daily rate. The monthly rate is three times the weekly rate, and so on. Hawthorne Rent It Service will also arrange for rental equipment to be moved from one job site to another. Depending on distance, this generally costs about $100.

With rental companies providing transport, pickup, and routine maintenance services, rental becomes the most hassle-free, most economical, and even safest option in many situations. Also, more and better equipment is readily available at local outlets in many markets. Same-day rental of heavy, light, and allied equipment and specialized tools is now possible.

J.S. Cole Company has 225 major pieces of Caterpillar equipment: large scrapers, wheel loaders, compactors, and excavators. It serves a niche market of mid- to large-size contractors that have a need for more equipment than they own for a short time-generally one week to six months.

“Our customers come to us because we have low-hour-rate equipment that is highly productive for them. They might own some equipment themselves, but the next job could break the camel’s back. Rather than risk it, they’d prefer to have high availability,” explains Whelan. He adds that his company will send a quality-control specialist for minor repair work. Customers are typically responsible for routine maintenance, such as greasing and oil changes; in some cases the dealer may provide this service. The dealer will respond to major repair jobs. Customers, however, are required to obtain insurance to cover the costs of damage from equipment abuse.

Whelan also notes that J.S. Cole’s rental equipment puts on about 1,000 hours per year. “Although the useful life of most equipment is 10,000 hours or 10 years, we delete equipment from our fleet after 6,000 to 7,000 hours.” This equipment, he says, is traded in to the dealer. When equipment is nearing the end of its useful life, the rental company may offer to convert it to a rent-to-own. In this case, when the subsequent rental payments equal the sales price, the customer takes ownership. GX_bug_web

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Comments

  1. It definitely sounds to me like renting construction equipment is a good idea. I would really like to be able to look into this more for my business. We do larger projects sometimes, but not very often. Because of this, it doesn’t make much sense to buy our own construction equipment. But since this rental industry seems to be growing, this seems like it would be much easier. I will be sure to look into this to see if there is some good equipment available to rent in my area. http://www.ronsauto.ca/

    1. Hi Grant, Happy 4th! I saw your comment and wanted to reach out to you. I work for a rental company called Big Rentz. We specialize in renting anything and everything in the construction world. Wherever your project is, we can get you the equipment. We have around 1,200 different suppliers in over 6,000 locations. Feel free to check us out at bigrentz.com. Give us a call anytime. (855) 999-5438

  2. Thanks for the Post john! Really exciting to see growth in a new industry and the number syou laid out made it easy to get a better picture of just how valuable the heavy equipment rental industry is these days! Also, happy to know it seems to be common practice to throw away 2 thirds into the equipment’s life (helps keep things safe for the consumer)! http://www.ncrent.com/

  3. This is a great article on the benefits of renting machinery. It is plain to see why this industry has more than doubled since the 90’s. Especially for one-time jobs, renting heavy equipment will save loads more money than buying your own.

  4. Thanks for sharing this interesting article about heavy equipment rental. It’s incredible how inexpensive rental is compared to purchasing. If you are only working on a short term project then renting would save tons of money. I think that buying would be best for contractors that will be in business for a long time.

  5. John, I really liked your post! I thought that it was interesting to read about how beneficial it could be to rent heavy machinery. It’s good to see that the rental industry is growing, and the numbers that you have included in your article really made it clear just how big the industry has become over the past few years. While not a business owner myself, I have a good friend who owns a construction business. I’m going to mention this article to him so that he can read it! Thank you for posting! http://www.mlaholdings.com.au/forklift-hire/forklift-hire-perth

  6. We all know that heavy duty machinery is quite expensive it is to buy and maintain them, that is why most businesses are offering to hire out their heavy duty machinery to help pay their maintenance and service needs for their machine plus get something in their pockets and make a successful business out of it and help business that won’t really needs to use the machinery for a lifetime to save on costs. because heavy duty machinery can be quite expensive. The renting out of heavy duty machinery
    has created jobs for other people so support as much as you can people.

  7. There sounds like there’s a lot of benefits from renting equipment. I’m kinda curious if rent to own or just renting equipment is better. There’s a bunch of waste in this lot I just purchased and want to get rid of. I’m just searching for the best type of investment I can make. http://www.embreyattachments.com.au/products

  8. The fact that you trade in your equipment after 7,000 hours really says something. To me it says they care about safety. They best companies always put safety first. My friend sustained a horrible accident on a job site. It ended up really costing the company. When it’s a priority, everything runs smoothly. http://www.iltalaska.com

  9. I didn’t realize that rental services are more convenient now than ever, especially when it comes to heavy equipment like bobcats and bulldozers. It’s important to consider rental as an option as it can be a good financial decision for a lot of business who don’t feel the need to purchase certain equipment for a job. It all depends on your needs in the long run as a business to know if you can benefit from a rental option. https://eaglemerchantinc.com/services.html

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