Rental Equipment in Construction
Dec 17, 2013
Despite some encouraging signs of recovery and growth, the construction industry is still shaking off the repercussions of the housing bubble and the great recession that followed. The slow recovery of the country’s economy is stimulating contractors to adopt more cost-effective business practices, including renting instead of purchasing construction equipment.
As construction markets improve and residential and commercial housing markets continue their upward trend, the preference to rent equipment is driving unprecedented revenue growth for the rental industry. According to a May 2013 report from the American Rental Association (ARA), the equipment rental industry, thanks to double-digit growth in the construction sector, will reach over $33 billion in revenue in the U.S. in 2013. The ARA also reports that total equipment rental industry revenues are projected to grow 10.2 percent in 2014 and 14.9 percent in 2015.
So why are contractors choosing to rent instead of purchase equipment? And what makes renting a more cost-effective and efficient way of doing business?
With the current rate of unemployment in the U.S. at seven percent, and many long-term unemployed Americans due to lose their emergency benefits early next year, economic growth for 2014 will continue to be slow. At the same time, banks are still reluctant to take risks and lend money when, given the uncertainty of the housing market, a contractor cannot always confirm when a new job is going to come in. For contractors, a slow economic growth, an uncertain market and conservative lending practices on the part of banks are all reasons why renting construction equipment makes more financial sense than risking a loss from a capital investment.
After the housing market collapse, small and mid-scale contractors who diversified their services to include mining, utility and pipeline contracting, relied on dealers and rental houses to supply, store and service the equipment required for each particular job. The cost of renting is several thousand dollars less than that of buying and maintaining several different pieces of equipment each designed for a separate, specialized job. Equipment also depreciates in value once it is purchased. The money saved by renting frees up funds that can be used to invest in additional training for employees, hire more skilled operators and join industry membership organizations.
Working with rental houses and dealers gives a contractor access to a vast inventory of equipment, each piece catalogued with a description and price. A contractor can simply place an order by phone or online and expect to receive the equipment in a few days or less. Purchasing a piece of large-scale construction equipment typically involves a much longer research process and a much longer wait for the equipment to arrive onsite. Renting also allows a contractor to try out a piece of equipment to see how it works on the job before committing to purchasing it.
As the construction industry continues to weather the challenges of the post-crisis economy, contractors who choose to make changes to their pre-crisis business practices –changes that include renting instead of purchasing equipment– will be best prepared for sustainability and projected growth.
To truly maximize the benefits of renting construction equipment, companies and contractors also need productive management tools for the equipment. inspHire is pleased to be one of the premier suppliers of rental software for the construction industry, offering management tools that deliver with the speed, accuracy and visibility that customers require. Learn more about inspHire’s solutions for the construction industry, or contact us directly at (713) 513-6125.