For some in the construction industry, the high upfront costs and financing requirements involved with owning expensive equipment can make renting the only practical option.
However, there are many others who, though they have the financial wherewithal to own, nevertheless find renting equipment to be the smartest, most cost-effective option for their business. This article will review some of the key reasons that many construction pros today choose to rent their equipment, and how those insights may be able to help you make the best decisions for your business and save you some money this spring.
1. Lower Cost of Use
Depending on factors like the type of equipment and age of the machine, maintenance requirements, length of construction season in the area, and reliability of work, many equipment owners can only aspire to utilization rates of 70% or 80% on their equipment.
These productivity numbers can decline even further with unexpected challenges arise, such as early winter storms, delayed project timelines, or effects of a pandemic severely, to impact their ability to work.
On the other hand, equipment renters experience both the ability to largely avoid issues like maintenance downtime and have the flexibility adapt to unexpected situations, which means they may be able to aspire to nearly 100% utilization rates on their equipment during the time they have it.
While it’s true that the headline cost per day over time to own a machine is generally lower, when factoring in real-world utilization rates, renters usually end up with less cost per day of actual use.
2. Decrease Repair & Maintenance Costs
As a renter, you are generally not directly responsible for costs associated with repair and maintenance of machines. However, smart business owners know that costs such as these are factored into rental rates. Most rental dealers offer a staff of skilled professional mechanics who maintain service facilities that are pre-stocked with many critical parts and supplies for the brands and equipment types in their fleet.
Many dealers also run sophisticated fleet management and maintenance programs that ensure that their machines are serviced, repaired and maintained both as inexpensively and effectively as possible.
This gives them a level of scale and efficiency that most owners would find very difficult, if not impossible, to match, and on average, that translates to a significant reduction in total cost of ownership related to repair and maintenance for machines that are part of a rental versus owned fleets.
In practice, part of these savings is usually passed along to renters, as dealers compete with one another to offer the best quality equipment at the lowest possible price to their customers.
3. Decrease Impact of Breakdowns
When owned equipment breaks down in the field, in addition to having to pay for the repair of the equipment, there can be a significant loss in productive time while awaiting a fix, especially if the nature of the issue is not immediately apparent or the fix cannot be performed on-site.
That time can be expensive in different ways, including direct financial penalties for missing a deadline or having to delay or pull back from the other projects whose teams may have been counting on use of the machine.
However, when rented equipment breaks down in the field and cannot be quickly repaired, many rental operations are able to simply ship a comparable machine to allow work to resume quickly while they haul the unusable machine back to their shop for diagnostics and/or repairs, allowing renters to avoid some sources of cost and uncertainty that owners may face.
4. Timing the Market
In June 2020, the U.S. printed more money in one month than it did in the country’s first 200 years of existence, and at least partially as a result, 2021 experienced a real rate of inflation unseen in this country since the early 1980s. That inflation, coupled with surging construction demand and scarcity of equipment due to supply chain shortages, has driven the purchase prices for many types of new and used equipment to similarly unprecedented levels.
While no one can predict the future, many see this situation as unsustainable, and rather than potentially buying equipment at the top of the market, those considering equipment purchases may prefer to allow some time to pass in anticipation of a return more normal conditions.
Luckily for them, most have easy access to several rental dealers whose lots are full of equipment purchased prior to these price spikes.
As a result, rental rate increases, where they have been seen at all, have been generally significantly more moderate than purchase prices.
5. Minimize the Impact of Weather Disruption
It’s a fact of life in construction that bad weather can make many types of work unsafe or even impossible for days, weeks or potentially even longer on the unluckiest of projects.
Unfortunately, for equipment owners, the bills from equipment finance partners must be paid in full every month, regardless of the whims of Mother Nature. Renters, however, have access to options that can help to significantly reduce the equipment cost-related impacts of weather to their bottom line.
Typically, for short projects or even at the start of longer ones, renters may be able to simply look ahead at the weather forecast and delay or alter their rentals to avoid the risk of paying for a machine when it won’t be able to be used.
However, data shows that weather forecast accuracy generally dips below 50% after around 10 days out.
The weather outcome for all but the shortest projects is tentative, and renters can find themselves exposed to the risk of paying for equipment that ends up sitting at an unworkable site.
Over the past several years, advances in hyper-local weather-monitoring technology now allow rental dealers to offer low-priced protection plans from weather-related cost overruns, which kick in to pay the rent on a machine when jobsites get shut down due to the unpredictable elements. Options like this can serve to further stack the deck in favor of renting versus owning, regardless of your current equipment strategy.