The Right Time to Rent

March 15, 2006
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When contractors choose to own equipment, it is often because they want to have equipment where they want it, when they want it. However, they often overlook the cost of ownership, calculating only the purchase price of the equipment. Owning means paying a higher initial cash outlay, plus the cost of depreciation over time - a tax disadvantage. Rental charges, on the other hand, can be applied as an expense on the current tax year. Rental charges can be a direct cost to the current job that you are performing.

Other often overlooked aspects of ownership include the cost to store equipment, service it, train staff to use and maintain it, transport it, insure it, and eventually dispose of it. Owning means you must put capital towards a maintenance staff, training personnel, service area, storage building, trucks, drivers, fuel, parts, and the list goes on. Renting can help reduce costs while meeting a majority of needs by:


  • Assessing and providing the right equipment for the job
  • Offering a wide variety of innovative, up-to-date equipment
  • Staffing trained professionals who know the equipment and service of parts and breakdowns
  • Providing equipment maintenance and storage

By renting, you put the burden of buying, selling, organizing and maintaining equipment on the rental center, while freeing yourself to do what you do best - run your business.

Selection and Expertise

Renting lets you be flexible in the jobs you bid, allowing you to tackle projects that require a variety of pieces of equipment that you may not have the capital to purchase. Because you sometimes use certain types of equipment on a temporary basis, renting permits you to perform both seasonal work, such as catastrophic events, and work requiring specialized equipment, such as desiccants for large commercial remediation jobs.

Innovative and diverse equipment equals better results; thus, having access to the most-up-to-date machinery makes your job easier, saving you time and money, and giving you a chance to gain experience with the equipment, evaluate a new product line, and determine if it's in your best interest to purchase the piece later.

Having the most-up-to-date equipment is one challenge, but knowing how to use it can be an even greater hurdle. Because it's virtually impossible for any one person or company to be familiar with all the different types of equipment available and their uses, some rental companies have both general tool & equipment locations and specialty businesses - including scaffolding services, aerial specialists, pump & power, and more - that serve distinct customer markets that require a high level of technical expertise. This allows their specialist locations to concentrate on specific product lines and services while providing customers with comprehensive solutions to complex challenges.

Maintenance

Owners quickly discover that staffing and housing a maintenance team, replacing old and defective parts, and completing required paperwork is not only an expensive endeavor, but also a time-consuming hassle that leads to idle time and lost profit. Renting can help eliminate down time: malfunctioning equipment is replaced immediately by the rental center, which transports the new equipment to the jobsite. A good rental center warehouses and repairs the equipment, and staffs trained professionals who can assess project needs and train users to safely and efficiently use the equipment.

Storage

Warehousing presents another enticing reason to rent. Where owners need storage areas to maintain and store their equipment, rental centers take care of the storage for renters. Rental companies keep an inventory of small and large equipment items and parts on hand, as well as delivery vehicles to transport the equipment. They train drivers to secure equipment on trucks, transport items safely, and load and unload the equipment.

Finding the right equipment is only half the solution when it comes to completing a project successfully and within budget; selecting the appropriate means of acquiring that equipment is another component. A good rental center helps customers weigh their decision, select the right piece of equipment for the job, train them on the use of the item, transport the piece, and service it in the event of repairs.

Commercial Drying: An Example of Cost

A storm comes through your territory and all of your refrigerant dehumidifiers are out on jobs. Your company gets a call for a large commercial building that will take seven days to dry out.

This job will need 100 air movers and 20 large refrigerant dehumidifiers, and you are out of equipment. To purchase or to rent, that is the question. Your answer might be found Chart 1 (We will assume that because this is not a planned purchase, everything is bought at the manufacturer's list price). Some costs, rental rates, and billing amounts might vary across the country. There may be some extra incidental charges why you buy or when you rent, such as freight or tax. But we feel these are pretty accurate estimates.

Should you invest in another 120 pieces of equipment if you might not use them again for six months or a year? Do you have an extra $64,000 that you did not plan on spending? Do you have the extra storage space? Are the equipment distributors out of equipment because of the storm and waiting will cause you to loose the job? Is spending $64,000 to get back $34,000 a good investment at this time?

Some contractors will bring in another contractor to help them and use their equipment for the job. This usually can be done by giving the other contractor 50 percent of the billing. In this example, it would amount to giving the contractor $17,150. If this storm is large enough, the other contractor is probably already using his equipment on another job where he can earn 100 percent of the billing. You may also want to ask yourself, do you want to introduce your competitor to your customer or your adjuster? Next time, who will your customer call first?

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