How this alternative to equipment financing can work for your business
by Elizabeth Manning
September 16, 2015

Finding more efficient, economical ways to run your business is more important now than ever. Construction equipment is one of the highest costs a company has to carry, so it's only natural to look for alternative methods of acquiring access to the equipment you need to successfully complete a project.

Equipment timeshares are one such form of equipment financing that has cropped up in recent years. Similar to the idea of a real estate timeshare, construction equipment timeshares involve two or more contractors or business owners entering an agreement to purchase equipment together and share the piece.

The idea is to cut down on overall cost of the equipment and reduce idle time all at once. However, there are several key considerations to weigh before you decide how to acquire your construction equipment.

  1. Is leasing or full ownership of the equipment an option?
  2. Are all restrictions, agreements and processes in place?
  3. Is the company you are considering partnering with credible and trustworthy?

Frank Roth, vice president of sales and marketing for BlueLine Rental, recommends reviewing the total cost of ownership before making any immediate decisions. Roth said to consider this thought process in five steps. and answer the following questions before you get started.

  1. Do you have the financial leverage to buy a piece of equipment at a decent rate?
  2. Do you have the technical acumen on your team to buy the correct asset and brand?
  3. Do you have the ability to pick up and deliver the assets to the jobsites and projects that require them?
  4. Can you provide timely service for the equipment timely to avoid downtime and safety risk?
  5. Have you valued depreciation of the equipment properly for the true cost of ownership?

"If you can walk your way through these five questions, and answer yes to them, then you should finally consider annual utilization of the equipment to determine ownership vs. renting," Roth said.

Roth's point is to consider what the equipment will be used for and at what frequency before ever considering buying, renting or entering a timeshare. The bottom line, Roth said, is there is more to the total cost of ownership than the initial purchase price.

If ownership is not a feasible option, rental choices abound. For business owners interested in the idea of renting from a private contractor rather than a rental company that specializes in construction equipment, it is paramount that you have safeguards in place prior to entering this kind of agreement. Some companies already facilitate such a setup between contractors. For example, Caterpillar and Yard Club, a peer-to-peer rental startup company, announced a partnership earlier this year to organize and enable contractors to rent idle equipment to other contractors in their area.

Chris Gustafson, the national accounts division manager for Caterpillar Inc., oversees the rental relationship with Yard Club. The pilot round of this partnership began with a dealer in Arizona. A dealer in western Canada recently joined the program, and Gustafson said they will open a third soon.

In this program, dealers develop clubs within their territories with contractors who want to engage in a peer-to-peer rental environment.

Yard Club provides the user interface—a mobile app and web capability for customers to rent equipment by selecting whether they want to rent from the dealer or from a peer in their area.

"We are just now beginning the peer-to-peer function with the customers," Gustafson said

Gustafson said it is beneficial to consider new ways to make equipment management more efficient for the owner.

"The more idle time we can reduce, the better off everyone is," Gustafson said. "Opportunities like this provide contractors with other options for an additional source of income."

As advice for contractors concerning the timeshare/rental idea, Gustafson said contractors should take a good look at their fleet and what is being used. If a contractor determines that he has idle equipment—either short term or long term—he should consider joining this type of environment.

"I would recommend joining a club or program where certain precautions are already put in place," Gustafson said. "The tools, agreements and the process should be designed based on strong rental industry principals that will help streamline the entire process for the renter and the rentee."

With cutting-edge technology made specifically for the construction industry comes an opportunity for more partnerships like Caterpillar and Yard Club and other apps that facilitate equipment sharing between jobsites in close proximity. To ensure you are mitigating risk and utilizing your business effectively, make sure you have a detailed plan in place before entering an equipment timeshare or similar program.