By Dennis Howard – RDO Equipment Co.
With High Business Costs in the Construction Industry, Now Might Be the Right Time to Rent Equipment Instead of Buy.
I’ve said it before, and I will repeat it now: Renting is a viable business strategy to acquire the equipment a contractor needs during this year’s conditions, marked by high demand and increased business costs. Unlike 2021, where contractors were pushed into renting or buying a used machine due to supply chain issues, this year’s market conditions and strategies learned from years ago prove that renting construction equipment allows contractors to adapt to the ebbs and flows of their business needs. Several market changes influence these strategies as we near this year’s midpoint.
Most dealers’ heavy equipment inventories have returned to their pre-pandemic size, and most of the time, if a dealer doesn’t have a specific machine, they can source it from their Original Equipment Manufacturer (OEM) partner. The availability of machines paired with high interest rates makes buying a less attractive strategy for contractors growing their businesses.
At a recent equipment conference, I spoke with Alise Moncure, the chief executive officer of Integrated Rental, a heavy equipment rental software company. Moncure said the demand for renting heavy equipment grew tremendously in 2023.
“Last year, demand for rental equipment was driven by machine supply chain issues and rising interest rates, making purchasing equipment more costly,” she said. “In 2024, we will likely continue on the same trajectory, even with machine supply correcting.”
Dealers are drawn to offering rental equipment because it allows them to diversify their revenue streams and protect from cyclical downturns in customer buying habits, Moncure explained. Most dealers provide more options to rent so that contractors can find their desired machine within their budget. Overall, there are more rental machines on any jobsite than ever.
“Contractors benefit from renting from a dealer because a regional dealer’s fleet will have machines with lower production hours than a rental company,” she said. This year, equipment dealers are supported by OEMs to ensure their rental fleet has a healthy inventory. Unlike in previous years, when shortages caused rental fleets to have machines with a higher production time at standard rates.