If you're an independent contractor, you know how critical it is to have the right equipment for the job, whatever that project may be. If you're wondering whether renting may be a good way to source that machinery, the answer is likely yes. There are many situations in which renting is the most effective option. In this post, we'll look at how renting has risen in popularity and why you may want to consider renting equipment, plus some basic tips to help you get started.
Any workers who are not employees are instead independent contractors. While terms like "general contractor" are unique to the construction industry, any person in any trade who works for themselves rather than for a company is an independent contractor. One hallmark of being an independent contractor is that you must supply your own tools, equipment and supplies.
If a homeowner hires you to install a fence in their backyard, you wouldn't expect them to provide you with an auger or post hole digger. The homeowner would expect you, as the professional, to bring along whatever equipment you need to do the job.
The same principle applies in less obvious scenarios, as well. If a general contractor hires you as a subcontractor on a project, or even if a subcontractor hires you as a sub-subcontractor, you should assume you're expected to provide your own equipment.
This responsibility to source your own equipment is one reason why renting is a valuable option for contractors. It allows you to get the machinery you'll need for a job right when you need it. When you make renting a part of your strategy for sourcing equipment, there's no need to have a storage facility full of machines you required once and may not use again in the future. Similarly, you don't have to show up to a job without the ideal equipment for the project.
Contractors who have been in business for a couple decades or more may have noticed the attitude toward renting has shifted. The Great Recession presented major financial challenges for many industries and likely pushed some contractors to consider renting for the first time. Even as the economic climate has improved, renting has steadily risen in popularity within construction and other industries.
According to a study from the American Rental Association (ARA), renting equipment is at an all-time high within the construction industry. More than nine out of every 10 respondents in their study said they had rented equipment in 2019, and more than half said they expected to rent more the next year. In the U.S., the market size of the heavy equipment rental industry currently sits around $46.1 billion.
Rental growth is set to continue, both in the U.S. and across the world. Estimates project the global size of the construction equipment rental industry will likely exceed an appreciable $170 billion by 2026. More contractors are discovering the benefits they can cash in on when they rent equipment. We'll explore some of those advantages below.
Why are contractors increasingly renting instead of buying equipment? While purchasing equipment certainly makes the most sense in some instances, there are many situations where renting is the smartest choice. That's because renting machinery has some unique advantages that can help your business grow and thrive. Let's look at some top benefits of this practice for independent contractors.
In addition to being convenient, renting can:
You never want to turn down a job simply because you don't have the necessary equipment. If you solely depend on the machines you own, you may run into restrictions on what you can do and miss out on profits because of it. What if you could bid on a job you would otherwise have overlooked because you don't have the right tools? Access to rental equipment makes that possible.
Another situation many contractors have experienced is when a client, being pleased with the work they've done so far, asks about additional services they may provide. You may even try to upsell certain services where you can to improve the finished product and your bottom line. Of course, equipment limitations can get in the way here.
Let's say you're landscaping a homeowner's backyard, and they decide mid-job they would love to add an in-ground plunge pool to perfect their outdoor living space. They would be thrilled if you would handle this installation. However, you don't have a mini excavator, compact utility loader or other piece of necessary heavy equipment to make the job a practical possibility for your team.
Rather than letting this job go to another local contractor with the right tools, you might enhance your profit on the project by saying yes to that add-on and renting the equipment you need to accomplish it. Plus, when you say yes, the homeowner will see you as accommodating and willing to deliver excellent service. You might also form contracts with some neighbors who would like you to provide similar services for their properties.
Every contractor would agree that renting costs less in the short term, but it may be less obvious that it can also be more cost-effective in the long term. Even if you have to rent the same piece of equipment repeatedly or for a long time span, there's still a good chance you'll save money compared to buying the machinery.
According to a general rule of thumb in the construction industry, if a piece of equipment you bought is sitting unused for 60%-70% of the time or more, you would have been better off renting it. Another way to think about this rule is that if you'll only use a machine about 30%-40% of the time or less, renting is the more cost-effective option.
When buying equipment, you generally must pay a deposit and make ongoing loan payments for an average of three to seven years. This means a substantial part of your revenue may be tied up in equipment costs. By renting, you can keep machine expenses low and avoid the burden of making a down payment. The result is improved cash flow, which can allow you to invest in other areas and grow your business.
Another important cost consideration with renting is that you don't have to worry about depreciation or resale. These financial factors will likely be on your mind as an equipment owner, but when you rent, you no longer have to concern yourself with them.
Two prevalent myths about renting are that rental equipment is of poor quality and doesn't offer any technology features. These assumptions may prevent some contractors from even considering renting. However, you can find high-quality, cutting-edge equipment from places like The Cat® Rental Store.
Renting can give you greater access to machines with new tech features. Since purchasing is more expensive than renting, some contractors who opt for ownership may buy more affordable used equipment. By renting, they could save money and choose from recent models with enhanced efficiency, operator ergonomics, payload measurements and other features.
Another consideration when you purchase machinery is that a piece of heavy equipment can easily last over a decade. If you buy a machine, you'll use it for a long time before retiring or selling it. However, as technology progresses rapidly, you may end up with hardware without the latest features unless you spend more money on upgrades and add-ons.
By renting equipment with the latest innovations, you can benefit from this technology on the job without investing the money it would take to own these advanced machines.
Renting also saves you from maintaining equipment. Part of this responsibility is financial. Ongoing maintenance costs are one of the major components of equipment ownership expenses. Preventive maintenance tasks are vital to keeping your machinery at its best and extending its life. In addition to routine maintenance, owners will likely have to pay unexpected repair costs occasionally.
Maintaining your equipment also means you have to create and follow maintenance schedules, which will differ from one piece of hardware to the next. You will also need to schedule maintenance strategically to minimize downtime and carefully document any upkeep that occurs, both for your records and resale purposes. As a busy contractor, you may not want to add managing these maintenance responsibilities to your itinerary.
Luckily, rental companies handle equipment maintenance, so you don't have to take on this responsibility and the costs involved. The machinery you receive should be well-maintained according to manufacturer recommendations. If you use a piece of rental equipment and it breaks down for some reason, you won't have to pay to fix it as long as the breakdown wasn't due to misuse.
Another responsibility you can forgo when you rent equipment is storing and transporting it. This factor especially applies to one-off and short-term rentals. Storing equipment — especially large pieces of heavy machinery — requires a sizable storage area with high ceilings. Along with the cost to own or rent warehouse space, you also need to factor in insurance and security expenses to keep your equipment safe since these machines are valuable assets.
A large construction company may be able to handle these costs and have a warehouse where they keep their fleet when it's not in use. However, for smaller companies or independent contractors who work on their own, a large storage area may not be an option — especially if you're in an urban environment where space is hard to come by.
Another consideration is transporting your equipment to and from job sites. Doing this can become complex and costly whenever you take a job out of town. Traveling for a long distance with an oversized load and potentially obtaining permits from multiple states can be time-consuming and paperwork-heavy. Plus, you'll also need to factor in the costs for fuel and driver labor.
In these situations, it's much easier to partner with a rental company near the job so you can get your equipment there easily and avoid hauling it long-distance. Even for local projects, renting can save you from transporting machinery at all. You might have your rental dealer drop off the equipment right on the job site and pick it up when you're finished.
If you plan to purchase equipment, renting can be an excellent way to test it before you make that long-term commitment. For example, if you want to buy an excavator, you may be unsure which size and model you should choose. Or, maybe you aren't sure whether you should get a small excavator or a backhoe loader.
After narrowing your selection down to a few options, why not rent each one at separate times so you can get a true feel for what each model is like in action? Brand reputations, testimonials and reviews can help you decide what equipment to buy, but there's no real substitute for trying the hardware yourself. Even if you're comparing very similar machines, you may find you prefer the operator controls or other certain features on one over another.
Keep in mind that even if you fall in love with a specific piece of equipment you've rented, that doesn't necessarily mean you should purchase it. You may still benefit from renting it for all the reasons we looked at above — and possibly more. Renting can be a smart and strategic choice, even if you find yourself renting the same piece of equipment somewhat frequently.
As we've seen, renting equipment can benefit contractors in numerous ways. If you're new to the process, you should follow some best practices to ensure you have a positive experience and maximize the benefits you gain from your rental. Follow these tips to become a savvy equipment renter:
Not all rental companies are the same, and keeping this aspect in mind will help you decide on the right business that meets all your needs. When starting the search, you should look for a rental dealer with a location near you or your job site. However, proximity is just one of the many things you should pay attention to. Look for a company that offers:
There are three basic types of rental durations, each of which gets its own contract. Make sure you understand the differences between them all so you can decide which option makes the most sense for you:
You're likely used to forming contracts with your clients, so you know how important it is to understand the arrangement to ensure both parties are on the same page. A rental agreement works the same way.
We've already mentioned some important aspects of your rental agreement you should be aware of, such as the pricing and contract duration. There are also many more terms you should notice and ensure you comprehend when signing a contract. Make sure you read all the details of the rental agreement provided by your dealer so you don't inadvertently violate them or misunderstand something.
For example, you should see what the agreement says about liability. In what instances is the rental company liable for equipment damage, and when are you as the renter liable? Are there any routine cleaning or maintenance tasks you must perform on the machinery? If the answers to these or other questions aren't clear from your rental agreement, feel free to ask your rental company to clarify.
The Cat Rental Store is a trusted source across the globe for quality rental equipment. With more than 1,300 locations worldwide, The Cat Rental Store offers dealers in your area and enables you to choose from our extensive selection of high-quality equipment to fit nearly any job. Our dealers' offerings include cutting-edge machinery and tools from Caterpillar and other reputable brands. When you get in touch with a local dealer, they'll deliver equipment on time to your site so you can enjoy a convenient and cost-effective rental experience.
Call 1-800-RENT-CAT or browse through our equipment inventory online to find what you're looking for. Rent whatever you need from the people who do whatever it takes.Find The Cat Rental Store Near You