How to Keep Heavy Equipment Rental Costs Low

Renting heavy equipment is advantageous when both the contractor and the dealer work together. Like most relationships in business and in life, the best arrangements are mutually beneficial.For the dealership, renters provide income and help reduce the cost of keeping new machines in stock. For the contractor, renting makes construction equipment acquisition more affordable and offers a way to take on projects where an additional or specialized machine is required. In balance, equipment rental helps both sides make a living and earn a profit.

Consider that just looking through the phone book and calling dealers to get the lowest rental rate is not necessarily in your best interest over the long-term.

According to Mark Watson, a partner with RTL Equipment Inc. in Grimes, Iowa, you’ll get better rates and service by building a relationship with a dealer who knows your needs and how you operate. You should also seek to work with a dealer who offers well-maintained equipment.

Get a Lower Construction Equipment Rental Rate

“There are several considerations when determining a rental rate,” Watson says. “The dealer considers the current market and the availability of the machine needed. Rental length and customer history are also factors when quoting rates. It is also important to know how the contractor plans to use the equipment and how he treats machinery. Pay history is important, too.”

“The dealer has to meet what the market dictates in the current times, which is significantly lower today than it was two or three years ago,” Watson says. “We also have to match our demand based on what we have in stock and what we need to make money for us.”

One key to lower rates is to rent for a length of term that makes sense from a business standpoint. “The longer the term, the better the rate’s going to be,” Watson stated. “If you’re going to rent for six months, you’re going to get a better rate than renting for one month.”

It also pays to plan ahead, Watson says. For example, if you have two jobs that will take three months each with a two-month break in between, you may be better off renting a piece of equipment for eight months rather than renting for two three-month periods. “That way you’re also assured of machine availability.”

In addition, check with the dealer to see who is responsible for repairs and maintenance, while the machine is on rent. Typically, the contractor is responsible for all routine maintenance such as oil and filter changes unless agreed to ahead of time. Many dealers will perform this maintenance in the field with their own staff and specialized service vehicles if the contractor agrees to pay for it. However, if you have your own service technicians, it is beneficial to do this work yourself.

“We have a lot of customers who do their own maintenance,” Watson said. “Many have their own mechanics and shops and feel they can do it cheaper than we can. Also, they can do the maintenance when it is convenient for them. They can bring someone in at 4 in the morning rather than shutting the machine down during the day.”

Be Prepared

Beyond machine maintenance, be prepared to address several items when you rent heavy equipment. One of the most important items is insurance. Most dealers require liability and physical damage insurance before they will enter a rental agreement.

Another consideration is having an experienced operator. Like most dealers, RTL Equipment only does bare rentals and does not provide operators for its equipment.

“Before a machine goes out, we will show the contractor how  it works,” Watson says. “However, we are not certified trainers. The operator needs to read and understand the operator’s manual. And if the machine requires a certified operator, the contractor needs to have one on his staff or to hire one from the union hall.” He adds that some dealers supply operators for some equipment, but these rates are significantly higher.

A final expense is the cost of delivery and setup. “You’re going to pay to haul the machine back and forth to your job site,” Watson says. “If you need us to come out and put it together (such as in the case of a large crane), we’ll charge for that as well.”

He continues, “When a machine comes back, we’ll look for damage and you’ll pay for any repairs.” Also, remember that rental units should be returned with a full tank of fuel to avoid a refueling charge.

Consider Rent-to-Own

Currently, many contractors are using the rent-to-own process to acquire new or nearly-new equipment that they could not otherwise afford or for which they could not obtain bank financing.

“Because money is so tight from lending institutions,” Watson says. “Very few pieces go out of here that are not rent-to-own.”

With rent-to-own, the price is established in advance, he says. Typically, 90 percent of the rental payments are then applied to a declining balance for a specified period of time. Interest is charged on the declining balance. At any time, the contractor can buy out. Any charges for repairs or maintenance are added onto the purchase price by the dealership.

Occasionally, contractors run into situations that require them to bring the machine back. “Things happen,” Watson says. “Jobs get cancelled or guys don’t actually get jobs that were awarded to them.” If the contractor and dealership have a strong relationship, many dealers will try to work with the customer to minimize costs in these situations.

Rental also lessens some of the worry that keeps small contractors up at night. “It’s tough for a small contractor to buy a $150,000 excavator, especially when you don’t know what’s going to happen in two or three years,” Watson says. “When the housing market was booming, a lot of people were buying equipment because they knew it would continue for a while. But now many contractors don’t know if they’ll have work down the road.”

Renting equipment has distinct advantages. Chief among them is increased cash flow. “If you don’t need a piece of equipment for an extended period of time, you’re better off renting,” Watson says. “There’s no cash outlay up front and you can deduct the rental payments on your taxes as a business expense.”

Construction Business Owner, October 2010