Capitalizing on Construction Equipment Rental Fleets

While the attitude for big infrastructure projects is indefinite, there is a robust bright spot in the construction industry’s yet to come. Equipment rental businesses are predicting fast-growing achievement by presenting contractors the newest machines without the large payments. Not merely has the rate of equipment rentals developed in each of the past three years; however the amount of rental dealers has increased, too. This is also being felt by Axis Capital Group, Singapore (company is servicing many Southeast Asian countries such as KL Malaysia, Beijing China, Jakarta Indonesia and many more).

That’s due to construction companies are ruling it more cost-effective to rent vs buying costly equipment that will just be used for a little period of time. According to a rental industry study by Andy Agoos for Neff Rental, in the U.S. today, about 40 percent of construction equipment is rented — and that’s expected to increase.

There are numerous influences that go into the rent rather than buy verdict for contractors and construction companies. These consist of the length of the job, the trouble of transporting a piece of equipment to jobsites, and the possibility of gaining additional projects where that specific piece of equipment will be used. All of these factors combine to make renting more attractive than buying, for some companies.

Dealers may obtain their rental equipment in many means — normally new from manufacturers or used from auction. When they agree it’s no more cost-effective to hold onto renting out a specific piece of equipment, they can trade it to an end-user or put it up for auction again. Warning, there are many risks in buying from an auction.

Costs for well-maintained quality equipment with low usage rates are increasing. According to some reports, in August 2013 (the most recent date for which figures are available), rental rates increased 0.8% from the prior month, on average, for the rental companies that participate in the Rouse Analytics Rental Metrics Benchmark Services. Rates were up 4.0% from August 2012.

In reality, the construction equipment rental business in the U.S. is anticipated to grow 12% in 2014 to approximately $37 billion in total revenues, according to Frank Manfredi, president of Manfredi & Associates, Inc., a market research and consulting firm that specializes in the industrial sector of the rental industry.

Manfredi estimates that about half of U.S. dealers offer rentals in addition to sales. As the market for equipment rentals continues to develop, nearly all dealers fall into one of these buckets: A retail store that rents, or a rental store that sells.

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Axis Capital Group