By Jason Perez – From YARDZ
A balanced focus on price, duration, and quality — supported by strong supplier relationships — is key to achieving efficient and cost-effective equipment rental management.
In recent times, contractors in the construction industry have faced a challenging trend: the significant rise in the cost of renting construction equipment.
A report from the American Rental Association indicated that in the third quarter of 2023, the year-over-year growth was expected to be 7.6% in 2023 and 3.1% in 2024. But projections in November put that figure at 11.8% growth in 2023 totaling $71.5 billion in construction and general tool rental revenue. As for 2024, a 7.1% revenue increase is now expected.
There are a number of practical strategies and technologies that contractors can employ to mitigate the financial impact of these escalating expenses.
Understanding the Rental Cost Surge
The first step in addressing this issue is understanding the factors that are contributing to the rise in rental costs. Economic fluctuations, increased demand for construction services, a shortage in equipment supply, and higher maintenance costs for equipment are among the key drivers. These factors combine to create a market in which rental prices are consistently escalating, placing additional financial burdens on contractors.
It should be noted that domestically, the use of rental equipment compared to owned fleet continues to rise as well. This trend is more in line with the “rented to owned” mix employed in Europe.
Strategic Responses to Rising Costs
There are numerous approaches that contractors can take to negotiate rental costs downward – and keep them down. It’s likely that you’re familiar with many of these strategies. Unfortunately, it can be easy to get so wrapped up in the day-to-day logistics of running a business or managing a project that these common-sense strategies get ignored. The key, then, is to ensure that you actually implement them.
Negotiate Initial Rates: The cornerstone of cost management in equipment rental is the art of negotiation. Contractors must initiate discussions with rental companies to secure favorable rates. Much like negotiating a car purchase, understanding the market rate, and leveraging competitive pricing is imperative. Contractors should be aware that rental companies have pricing flexibility and may offer significant discounts on listed rates.
Additionally, rates may heavily vary from region to region.