Powering the Industry

The Role of Rentals
Written by Robert Hoshowsky

From masonry drill bits to backhoes and everything in between, renting instead of buying construction equipment often makes beautiful business sense.

For contractors tackling projects of all sizes, the age-old question remains: should I buy the equipment, or is it better to rent?

The answer isn’t always straightforward, and depends on factors including the size and duration of the job, budget, and short and long-term needs. For homeowners planning a one-off kitchen or bathroom renovation, you can purchase a seven-inch portable tile saw for as little as $100.

Yet for renovators lining-up multiple projects, instead of coughing up a large sum of dollars for a new saw – $1,000 or more for a suitable 24-inch professional version with a built-in folding stand and water system to extend the life of expensive diamond saw blades – the best solution is often to rent.

Depending on the rental company, tile saws can be had for as little as $40 for four hours, up to $600 for as long as four weeks.

A growing market
According to the non-profit American Rental Association (ARA) – which educates, supports and advocates on behalf of its members and the rental community – the rental market is a $65-billion-a-year business. Last year, prior to the COVID-19 pandemic, the ARA foresaw the industry reaching $69.8 billion by 2022.

Surprisingly, the history of equipment and machinery rental is relatively short, with the ARA, one of the first to promote the sector, starting up in the mid-1950s. The 1970s saw significant growth in rental businesses, with home-improvement giants like The Home Depot and Lowe’s later entering the market.

Today, it is possible to rent everything necessary for new construction and renovation works from compactors to cutters, and paint supplies to plumbing. Years ago, rentals were limited to smaller tools, like drills, circular saws, and floor sanders. Today, customers can rent trenchers, skid steers, mini excavators, and even forklifts. Along with delivery and pick-up of larger machinery, many building supply companies rent vehicles including cargo vans, pickup trucks, and open or closed trailers by the hour or the day.

Machines big and small
For contractors and construction companies of all sizes, renting holds many advantages over buying, especially with enormous pieces of equipment like cranes and boom trucks which can be rented with trained operators, superintendents, and even a foreman.

Depending on the machinery, prices can range from a few hundred dollars to thousands. A full-sized excavator, one of the most essential pieces of construction equipment, can cost anywhere from $100,000 to half a million dollars brand new. Even good used excavators from reputable dealers sell for about 75 percent of their original price, making them unaffordable to many smaller contractors.

The larger the item of equipment, the more complicated it is, and thus prone to breaking-down. While some items require little attention (scaffolds, for example), dump trucks, excavators and other pieces of heavy machinery require plenty of costly maintenance. Many rental companies provide repairs as part of their offerings, meaning if a truck malfunctions on a job site, they will send a trained technician to evaluate the problem, and get it up and running.

On the other hand, ownership of a large piece of equipment worth thousands of dollars requires in-house mechanics, or the contracting and paying of an outside company to undertake maintenance and repairs. If companies choose to buy, they also should have a supply of parts permanently available for repair or replacement, yet another cost.

With owned machinery, there is also the issue of permanent storage. While purchasing equipment means it is on hand and ready for use, backhoes, excavators and other big items require plenty of land and storage sheds or prefab Quonset huts. Trucks, trailers and other large equipment also require insurance, and security such as fences, multiple cameras, and alarm systems to deter theft.

Benefits of renting
The market for construction rentals has expanded in recent years, for many excellent reasons.

While everyone loves the look and feel of brand new tools and machinery, more contractors and construction company owners are asking themselves if paying premium prices for new products is worth the money. Much like buying the latest model car fresh off the lot, new equipment depreciates in value, and can become outdated very quickly.

It’s also depressing to buy equipment straight off the showroom floor, only to find that an improved and updated model is being released just months later. To circumvent this, most construction rental companies invest in the most up-to-date, fuel efficient technology and products on the market.

Another factor to consider when renting instead of buying is distance, especially for construction companies with obligations all over the map. While many contractors take pride in ownership, this can be a challenge for businesses taking on projects in locations hundreds of miles away.

Time, money and manpower are needed to transport owned equipment from one job site to another, which also ties-up larger pieces like scissor lifts, boom lifts, excavators, skid steers and more at one site for weeks, even months at a time. In these cases, it often makes sense to rent from a local provider.

When deciding about renting or buying, one of the most important questions is: how often will I be using the equipment? Will it be daily, or weekly? If it will be on job sites regularly, purchasing machinery may make more sense. However, if the product is used just once a month, it is time to considering renting from a reputable dealer.

This is also where construction management software – and an honest assessment of want versus need – comes into play. As a general rule, construction equipment should be in use 60 to 70 per cent of the time; any less, and spending thousands of dollars or more on a grader, trencher or bulldozer just doesn’t make the outlay of cash or the line of credit worthwhile.

The downside of ownership
Although owning construction equipment has its perks – from being available when needed to tax write-offs, and building equity in the company – there are also many downsides, from storage to insurance, from costly ongoing maintenance to depreciation and technological obsolescence.

On the other side, the benefits of renting are many. Depending on the tool or equipment, it can be rented for as long as necessary. If the work winds-up quickly, there are usually no penalties for bringing back the item early, and payment stops. From an administrative perspective, renting requires little paperwork, and is considered a business expense.

Much like renting a car, one of the greatest advantages of renting is that it gives the operator an opportunity to ‘test drive’ the equipment. Since the only way to determine how an impact driver feels in the hand or how smoothly a backhoe operates is to use these in the field, renting machinery gives workers the chance to see if they prefer one brand or model over another as a potential purchase.

And as COVID-19 has brought us many hardships, it has also created opportunities for business growth, including in the worldwide construction rental market.

According to 3w Market News Reports, rapid global growth – especially in the construction and mining sectors – is creating an increased demand for construction equipment rentals. In its Analysis of COVID-19 Crisis-driven Growth Opportunities in Construction Equipment Rental Market, it says that the developing world “is likely to fuel growth of the global construction equipment rental market in the years to come,” and “Technological upgradation or enhancements provided by the manufacturers of original equipment are further expected to drive the renting services for construction equipment in the market.”

Many of these high-tech upgrades, like 360-degree cameras for easier operator orientation and safety, and lift assist, are unaffordable to many smaller construction companies – and will trigger greater demand in the already booming equipment rental industry.



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