Eastern Power Equipment
285 Route 9 PO Box 97 Barrington, NH 03825
Phone 603/664-7776 | Toll Free 866/664-7776 | Fax 603/664-7420 | email chuck@easternpowerequipment.com
Renting: a profitable equipment-acquisition option
If you've never rented equipment to take on additional jobs, tackle new construction challenges, or to supplement your equipment fleet, you're probably missing profitable growth opportunities.
Renting equipment, rather than buying it, can increase your cash flow, cut equipment costs and free capital without increasing your debt ratio. The choice to rent depends on your business circumstances, the length of time or the number of times you will need the equipment.
The rental contract
The advantages of renting
Since losing the Investment Tax Credit in 1986, contractors in ever increasing numbers look at renting as more than simply a way to occasionally supplement their rental fleets. Today, many contractors figure equipment rental into their overall business planning process. Behind the rental contract is this concept: if the use of equipment is temporary or limited and the purchase price is high, then renting is the profitable solution.
The American Rental Association estimates that approximately 80 percent of the 18,000 rental operations in the United States and Canada rent at least some contractor equipment. And now, contractors can find the equipment they need anytime, anywhere, by selecting "Find A Rental Store" on this Web site.
Although equipment inventory varies by rental store, some examples are: concrete equipment, earth-moving equipment, cranes, generators, scaffolding, skid steers, hydraulic and pneumatic tools. This short list omits most of the construction equipment you can expect to find for rent. At the American Rental Association's annual international trade show, about 75 percent of the show floor (averaging 320,000 net square feet) is reserved for heavy and light construction equipment.
Under a rental agreement, you're paying for a service: the short-term use of equipment. Depending on the rental center's policy, you can rent equipment by the hour, half day, day, week or longer. Many rental centers offer discounted monthly or quarterly rates.
The contract begins when you leave the store with the equipment and ends when you return it. You decide how long you will keep it, and there's no penalty for returning it sooner than you thought you would. Generally, the rental center is responsible for maintenance and breakdowns. And the rental contract does not involve transfer of title to you.
According to the terms of most rental contracts, while the equipment is in your possession, you're responsible for its proper use and security. Most rental contracts state that the equipment must be returned in the same condition you rented it, subject to ordinary wear and tear. Your business insurance may or may not cover rented equipment. If it doesn't, you can inexpensively extend your coverage to include it.
The advantages of renting let you avoid:
- Maintenance costs. The rental contract generally covers full maintenance of equipment. You need no repair shop, no spare parts or repair tools, no mechanic, no maintenance records.
- Missed opportunities and down time. When rented equipment breaks down, the rental center replaces it fast. You don't lose precious time while equipment is being repaired.
- Warehousing or storage. Return idle equipment to the rental center rather than using space to store it. Get it out of your way.
- Taxes and license costs. Personal property taxes and license costs don't apply to rented equipment.
- Logistics problems. Because rental centers offer similar equipment and service from coast to coast, you're likely to find specific rental items no matter where you accept a job.
- Hidden costs. Cost control is easy with rentals. When equipment is returned undamaged, the amount shown on the rental invoice is the only accountable cost figure you pay.
- Botched jobs. Because more people will make do with what's handy to get a job done, often equipment is used improperly, causing property damage and personal injury. Renting the right equipment will get it done safely and correctly.
- Equipment obsolescence. Rental centers update inventory each year, providing state-of-the-art equipment for their customers. And high-tech equipment doesn't cost you money collecting dust when you can rent it as you need it.
- Capital investment. Rentals free your capital for more profitable uses than being tied up in costly equipment. And rentals increase your borrowing power by offering a better ratio of assets to liabilities. Rented equipment does not appear as a liability on the balance sheet.