The equipment-driven rental industry is on the rise. Even though there was a slight dip in the share of construction equipment owned by rental companies in the US in 2015, the American Rental Association (ARA) states that there has been an increase of 40% in the past decade. In the second quarter of 2016, it was on the rise again, and it has shown positive growth since then. Revenue generated by equipment rental is expected to reach record levels by 2019.
Now, why is this?
The answer is simple. Purchasing construction equipment often requires significant down payments, diverting large proportions of capital from operating expenses. There are additional expenses like interests on loans, insurance, taxes, licensing, and storage costs. Plus, the recent financial crisis in which many construction companies went belly-up traumatized companies and made them more wary of what to do with their capital. They became more inclined to keep some in reserve for a rainy day, for example. Nonetheless, jobs still require certain equipment. But you don’t need that to be on your books at all times. Also, renting equipment can enable younger companies to compete for large contracts as well.
How it started
A booming oil and gas industry drove significant demand for construction equipment post-recession. But when oil prices took a nosedive in late 2014, the utilization rates of the construction equipment in these fields dropped significantly. This caused an exposure for lenders and also changed the destination of some of this equipment. Most equipment used in the oil and gas industry was put to use in other fields, like home building and municipal construction.
The future of equipment-driven rental
Over the past few years, the global economy has been growing, and so has the construction sector. But the philosophy of renting instead of owning equipment has persisted. This is due to the fact that renting is quite a logical and profitable business model. This offers rental companies the possibility to grow and be compatible. But you need to stay ahead, because there are many rental companies jockeying for the leading position. DynaRent made for Microsoft Dynamics 365 helps you to stay in front of your competitors by offering the leading software for the equipment-driven rental market. It offers everything you need to optimize utilization rates, react quickly to the market’s demands, control your service and maintenance. All linked to the rest of your business software.
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